ANNUAL REPORT 2004 PADAENG · PDF fileis call ''cathodic protection''. This phenomenon thereby offers a better protection than painting which bring only ''barrier protection

PADAENG INDUSTRYPUBLIC COMPANY LIMITED

ANNUAL REPORT 2004

Contents

General Information 1-7

Message from the Board of Directors 8-9

Highlights for the Year 2004 10

Key Figures and Ratios 11

The Year in Review 12-17

Conditions of the Industry

Operations

• Mining

• Raw Materials

• Calcine Plant

• Zinc Smelter

Mineral Resources and Exploration

Environment, Safety, Personnel and Community Relations 18-23

Management Report and Analysis

on Financial Status and Operating Performance 24

Risk Factors 25

Board of Directors, Strategic Committee

and Audit Committee 2004 26-28

Audit Committee's Statement 29

Financial Statements 30-61

Compliance to the Principles of Good Corporate Governance 62-65

Shareholders and Management 66-73

General Information

Background

Padaeng Industry was established on April 10, 1981 with the

original registered capital of Baht 20 million invested by Thai public

(Ministry of Finance), private investors and a private Company from

Belgium. The company has since‹ engaged in mining and refinery

business with the objective to produce zinc metal and zinc alloys

to serve the demand of our customers. The company's mine is

located in Mae Sot district, Tak province. The zinc smelter is located

in Muang district of the same province and the roaster is located

in Rayong. The company also has engaged in zinc ore exploration

programs both in Thailand and in neighboring countries.

The company was listed on the Stock Exchange of Thailand

on July 21, 1987 and was converted into a public Company limited

on February 4, 1994. In 1996, the Company increased its registered

capital to Baht 2,260 million which was fully paid in year 2000.

VisionPDI will be a low cost

producer

of high quality

zinc, able

to compete in its

markets with world

class producers,

providing valued

services to customers

and giving great

importance to the

environment.

It is used predominantly in the field of corrosion

protection. Steel is galvanized to obtain a zinc coat on

its surface. Subsequently the zinc layer protects the steel

substrate in two different ways. First, when the coating is

intact, zinc forms a barrier engulfing steel to shun it from

corrosive media and hence offers ''barrier protection''

to steel. Second, having a lower electrochemical potential

than steel, zinc behaves as anode while steel assumes

the role of cathode. When the coating is damaged, zinc

will corrode preferentially to steel. This interaction

is call ''cathodic protection''.

This phenomenon thereby offers a better protection

than painting which bring only ''barrier protection''.

Galvanized steel will offer long term and maintenance

free corrosion resistance to infrastructures.

SHG Zinc Metal

2 Padaeng IndustryPublic Company LimitedAnnual Report 2004

Zinc Galvanized Products

Product and their usesProducts of Padaeng Industry

consist of special high-grade zinc

metal and value added zinc alloys.

Their main applications are

described as follows :

Concourse building of

Suvarnabhumi Airport has

main structures in duplex

coating system

(painting steel that has

been hot-dip galvanized,

while the roofs are

glass and teflon canvas

which are fixed with

galvanized cables.

Suvarnabhumi AirportThe new Bangkok international airport


Zinc Die-Casting Products

Zinc AlloysPressure die-casting zinc alloys are used to

produce near finish cast products for industries of

construction, automotive, toy and audiovisual appliances.

In zinc-aluminium-magnesium alloys, aluminium helps

to increase tensile and creep strength as well as

toughness and castability, while magnesium provides

intergranular corrosion protection.

Zinc die-casting products require minimum

finishing step and may be further subjected to painting

and baking as well as to electroplating.

Zinc ChemicalsWhile different grades of zinc powder

are used in batteries and zinc

rich primers, zinc oxide finds its

application in vulcanization, ceramics,

paints, animal feed and even

in medical ointments.

BrassesBy combining zinc with copper in different

proportions, various grades of brass are

obtained for many varied applications.

These include bathroom accessories, valves,

decorative statues and brass tubes.

5Padaeng Industry

Public Company LimitedAnnual Report 2004

Zinc Die-Casting Products

Other Applications of

Zinc

Zinc Metal (SHG) 3,129.73 54.76 2,720.67 55.16 2,803.24 63.62

Zinc Alloy 2,262.72 39.59 1,822.62 36.95 1,370.66 31.11

Sulphuric Acid 187.91 3.29 100.67 2.04 67.98 1.54

Other Revenue 134.66 2.36 288.18 5.85 164.08 3.73

Total Revenues 5,715.02 100.00 4,932.14 100.00 4,405.96 100.00

Investment Policy in Subsidiary Companies

To be consistent with its business goal, the company develops only the subsidiaries related to zinc, such as joint

investments in exploration and mining projects in Thailand and in ASEAN. The other subsidiaries will continue to operate

their daily businesses as usual and independently from the company. At the moment the proportion of total investment

in subsidiaries is 7.2% of total assets.

Revenue Structure

The company's total revenue for the consolidated financial statement can be classified

by type of product (2002-2004)

2004 % of 2003 % of 2002 % of

Products Revenue Total Revenue Total Revenue Total

Million Baht Revenues Million Baht Revenues Million Baht Revenues


Subsidiary Companies Nature of Business Paid up Capital Shareholding %

(Baht)

1. Padaeng Properties Co.,Ltd. - Land development and real estate 80,000,000 100.00

2. Puthep Co.,Ltd. - Exploration and mining of copper 145,584,804 100.00

and other base metals

3. Padaeng Industry - Exploration and mining of base 5,000,000 100.00

(Laos) Co.,Ltd. metals in Laos

4. Padaeng International - Investing in exploration and mine 100,000 100.00

Mining Co.,Ltd. development projects in Vietnam

5. Sila Enterprise Co.,Ltd. - Production and marketing of 9,000,000 55.00

aggregate limestone

6. Padaeng Poongsan - Ceased business operations 250,000,000 61.98

Metals Co.,Ltd.

Other Affiliated Companies

1. South East Asia Matals Co.,Ltd. - Distributing base metals and 200,000,000 100.00

other by-products

Future Projects

Striving for continuous improvement, the company invests essentially in projects aiming at reducing the costs

or at increasing the efficiency of the processes. Though, in the current context of shortage and soaring costs of

foreign concentrates, the priority will also be given to further exploration of the local potential for mining and to

diversification projects in the ASEAN region such as joint-investments in mining and exploration.

Overall Business Operations of Subsidiary and Affiliated Companies

The company holds shares in the following groups of companies :

7Padaeng Industry


Messagefrom the Boardof Directors


2004 was a rebound year for Padaeng Industry Public Company Limited. The company's operating

performance rallied dramatically over the previous year primarily due to a stronger world zinc price and steady

demand, particularly in the domestic zinc consuming market. Sustained growth in the domestic steel galvanizing

and automotive parts industries led to increased sales volume of zinc metal and generated greater revenues

from sales of goods and services.

The company takes much pride in this year's accomplishments considering the many unexpected and

uncontrollable factors that were overcome. The company was able to maintain its position in a highly competitive

marketplace with a quality product and expert technical support and service. Soaring freight costs, which affected

import of concentrates was another uncontrollable factor that might have slowed the company's momentum.

Other obstacles met with during this year were national circumstances including higher electricity costs, which

registered far above that of competitors and the reduction of import duties on zinc metal by 2.25% as a result

of trade liberalization policies issued by the Thai government. This gradual tariff reduction will continue to be a

matter of concern for the company as it directly affects its competitiveness against better protected competitors.

The projects developed in 2004 were a continuation of the strategy put in place two years ago. Of particular

importance is the full-scale flotation unit that was commissioned at Mae Sot. With this full-scale flotation plant,

the company now has the capacity to economically mine lower grade ores and transform them into high grade

concentrates to complement the demand at the Smelter.

Throughout this past year the company also proceeded with plans for continuous improvement in terms

of safety and the environment. Unfortunately, the discovery of the presence of an abnormal level of cadmium

in the soil in areas near the Mae Sot mine has brought the company an unexpected concern. Upon learning of

this matter, the company took immediate action with local and provincial government offices to address the

situation. The company has commissioned an independent study to determine the cause and find constructive

ways in which to resolve the contamination problem. Whatever the outcome reveals, the company is committed

to continue to help restore the normal conditions of life for the community and will devote the necessary resources

to that end.

As 2004 has indeed been a spectacular year for the company, with impressive gains in revenue and profit,

the overall accomplishments are a combined effort by the hard work of our employees, suppor t from our

customers, loyalty of shareholders, and confidence shown by financial institutions,press and media and government

agencies. It is to each and every one of these individuals and organizations that the Board of Directors would

like to extend its sincere gratitude and appreciation for a job well done.

Mr. Bernard Tonnon

‹Managing Director

Mr. Pinit Vongmasa

Chief Executive Officer

Mr. Arsa Sarasin

Chairman

9Padaeng Industry


• Average LME price of zinc metal equaled USD 1,048 per mt, an increase of 26.5% from the average

of USD 828 per mt in 2003

• Import duties on zinc metal stood at 7.75% during the year, a reduction of 10% compared to 2003

• Sales of zinc metal reached 113,708 mt

• Domestic sales of zinc metal increased by 6.9%

• EBIT of Baht 248 million compared to Baht 38.7 million in 2003

• Consolidated net profit of Baht 217 million

• Equity increased from Baht 2,835 million to Baht 3,053 million while total liabilities decreased

by Baht 438 million

• The Calcine plant at Rayong received first recertification of ISO 14001 and achieved zero accidents

for five consecutive years

• Cadmium contamination found in villages around the Mine

• Exploration lease applications are still undergoing consideration by government agencies in 2004

Highlights for the Year 2004


Key Figures and Ratios

Consolidated

End of Year 2004 2003 2002

Sales (million baht) 5,674 4,836 4,390

Total Revenues (million baht) 5,715 4,932 4,406

Gross Profit (million baht) 769 430 466

Net Profit (Loss) (million baht) 217 0 (29)

Net Profit (Loss) Per Share (baht) 0.96 0.00 (0.13)

Net Profit (Loss) Per Total Revenue % 3.83 0.00 (0.66)

Total Assets (million baht) 4,905 5,125 4,562

Total Liabilities (million baht) 1,852 2,290 1,725

Shareholders' Equity (million baht) 3,053 2,835 2,838

Return on Assets % 4.33 0.00 (0.63)

Return on Equity % 7.11 0.00 (1.02)

Debt to Equity Ratio (times) 0.61 0.81 0.61

Book Value Per Share (baht) 13.51 12.54 12.56

Dividend Per Share (baht) 0.40 - -

11Padaeng Industry


TheYear in Review

Zinc Sales Volume

In 2004 the company's sales of metal were comparable to 2003 with a total volume

of 113,708 mt. The total revenue of sales and services was Baht 5,674 million. Domestic sales

accounted for 96,863 mt, or an increased of 6.9% from 2003. On the domestic market, the

zinc related industries continued to rise despite the slight slowdown of the economy during

the second half of the year. Total zinc metal consumption rose by 11.6% to 125,900 mt with

a growing demand, particularly in the sectors of steel galvanizing, zinc oxide and automobile

parts.

In 2004, the company also exported 16,845 mt of zinc, accounting for 15% of the total

sales. The reduced exports were a consequence of the higher demand on the local market.

China, Taiwan and Vietnam were the main export markets.

Conditions of the Industry

In 2004, the average LME price of zinc metal increased by USD 220 per mt, up from

USD 828 per mt in 2003, to USD 1,048 per mt, or an increase of 26.5%. This was due to a

recovery in the world economy, which enhanced the demand of zinc especially in the US and

China while several zinc refinery plants tended to reduce production capacity due to a shortage

of zinc ores. As a result, it was anticipated that there would be a deficit in the supply of zinc

metal along with a sharp drop in LME stocks. All base metal prices have fluctuated due to

funds buying whereby zinc has surged to a 7-year high record of USD‹ 1,270 per mt at the

end of Q4.

It was foreseen that the world demand of zinc metal would reach 10.34 million mt, an

increase by 4.8% from 2003, and would continue to grow by 4.3% to 10.78 million mt in 2005.


FIGURE 1 :

LME ZINC PRICES AND STOCK LEVELS

DURING THE PAST 10 YEAR

(USD)(Metric Ton)

1,500

1,350

1,200

1,050

900

750

0

LME Stock (Metric Ton)

Average LME Price (USD)

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

01995 1996 1997 1998 1999 2000 2001 2002 2003 2004

FIGURE 3 :

SALES VOLUME OF ZINC METAL

AND ALLOYS 2000 - 2004

2000 2001 2002 2003 2004

0

20,000

40,000

60,000

80,000

100,000

120,000

Zinc Metal (SHG)

Zinc Alloy

(Metric Ton)

Year

Competition in the Industry

Market competition is still a reality in Thailand. Smelters in Australia, Korea and China

remain active in exporting their products to Thailand. Due to the trade liberalization policies,

the competitive pressure is expected to increase in the future. However, the company is confident

that it will remain a leader on the local market thanks to its continued policy of product quality,

which meets the world-class standard, of speedy delivery, which reduces customers' stock

burden and of customers' satisfaction with its efficient and expert technical services.

The presence of a local smelter in Thailand suppor ts the government's agenda of

reducing the country's trade deficit. It also brings maximum profit to the local end-users who

receive the benefit of the company's technical knowledge in order to improve their production

process or product quality and take advantage of reliable, fast and competitiv e deliveries.

The company, being the sole manufacturer of high quality zinc metal among ASEAN

member countries and enjoying a prime geographic location, will also keep developing exports

while focusing on value-added products.

13Padaeng Industry


(Metric Ton)

Year

FIGURE 2 :

ZINC CONSUMPTION IN THAILAND

2000 - 2004

60,000

90,000

120,000

2000 2001 2002 2003 2004

130,000

(Metric Ton)

Year

FIGURE 4 :

SALES VALUE OF ZINC METAL

AND ALLOYS 2000 - 2004

2000 2001 2002 2003 2004

0

1,000

2,000

3,000

4,000

5,000

6,000

Zinc Metal (SHG)

Zinc Alloy

(Million Baht)

Year

FIGURE 5 :

SALES VOLUME OF ZINC 2000 - 2004

2000 2001 2002 2003 2004

0

20,000

40,000

60,000

80,000

100,000

• •• ••••••• ••••• ••••••• ••••

• •••

(Metric Ton)

Operations

Mining

In 2004, the Mae Sot mine produced a total of 167,024 dmt of zinc silicate ore, with

average zinc content of 26%, to feed to the Smelter in Tak province.

Next to the existing flotation plant, The mine commissioned successfully a full-scale

flotation plant which upgrades the low grade ores to concentrates. It allowed the production

to be increased up to 96,832 dmt.

The mine has been in operation for 21 years and currently holds ore reserves of 3,554,000

dmt, 12.7% zinc.


During 2004, the cost of impor ted zinc con-

centrates increased significantly because of two major

factors. First, the availability of zinc concentrates in the

global market declined due to mine closures and lower

levels of production than expected. Secondly, the cost

of freight increased as well following a general shortage

of ships and increased oil price.

As a consequence, the company will continue in

2005 to search for less remote sources of concentrates.

Raw Materials

In 2004 the company purchased a total of 105,881

dmt of zinc concentrates (mainly zinc sulphides) sourced

from South America, Australia and North America and

delivered to the Roaster in Rayong province.

In addition to the above procured zinc ore, the

Smelter at Tak took in 185,537 dmt of zinc silicate

ore and concentrates from the Mae Sot mine.

A marginal tonnage of silicate ores and oxide

materials that were not produced at the Mae Sot mine

was sourced in the neighboring countries.

Calcine Plant

At the Calcine plant in Rayong province, zinc

sulphide concentrate is converted into calcine prior to

being sent to the Tak smelter for further processing

together with zinc silicate ore to produce zinc metal.

Calcine production level in 2004 was comparable to the

production of 2003 with a total of 98,773 mt. In addition

101,994 mt of sulphuric acid was produced as a by-

product, generating an additional income of Baht 188

million compared to Baht 101 million in the previous

year.

a loading and pre-washing unit to remove chloride and

fluorine from oxide ores or secondary raw materials.

This investment will allow the use of cheaper and more

diversified raw materials.

• An existing transfo-rectifier 20 kA was added to

the circuit of the cellhouse resulting in a small production

increase of approximately 150 mt per month.

• A furnace was installed in the casting plant in

order to recycle the skims produced during the casting

operation. The recovered metal will be recycled in the

production.

• In 2004 the company also extended its range

of alloys by starting the production of alloys, with high

content of aluminium (up to 10%) for the galvanizing

industry.

Zinc Smelter

In 2004 a total of 108,577 mt of cathode zinc was

produced accounting for 97.8% of the total capacity

(111,000 mt). A total of 13,744 mt of zinc ingot was

imported to be refined into value added zinc alloys.

Total production of metal amounted 115,112 mt

including 68,285 mt of SHG products and 46,827 mt

of alloys.

Significant endeav ors to improv e production

efficiency in 2004 are as follows:

• A modification of the existing process with

2004 2003 2002

Calcine (mt) 98,773 98,743 113,764

Acid (mt) 101,994 98,063 116,722

15Padaeng Industry


Mineral Resource and

Exploration

Padaeng Mineral Resources

1. Padaeng Mine

On December 31, 2004 the total mineral resource

of Padaeng Mine at Mae Sot was 4,357,000 dmt @

12.2% zinc. The mineral resource was calculated using

a cut off gradeof 3% zincas shownin Table 1.

Table 1 : Mineral Resources at Padaeng Mine

(December 31st 2004)

Category Dry Metric Tons Zinc Grade

(dmt) (%)

Low Grade Ore Stockpile 482,000 6.9

High Grade Ore Stockpile 26,000 24.8

Measured Resource 1,629,000 13.0

Indicated Resource 1,858,000 12.6

Inferred Resource 362,000 13.0

Total 4,357,000 12.2

2. Hualon Mine

Hualon, Mining Lease Application number 1/2547,

is a re-applied mining lease separated from Padaeng

Mine. On December 31, 2004 the total mineral resource

of the Hualon Mine at Mae Sot was 295,000 dmt @ 6%

of zinc sulphide. An additional secondary zinc resource

of 44,000 dmt @ 7.1% zinc have been discovered.

Exploration

• Mae Sot Area

1. Existing Mining Leases

During 2004 exploration within the existing pit was

successful in finding additional zinc mineral resources

and extending the zones of zinc ore. Thirteen diamond

drill-holes, were drilled at the north edge within the

exiting mining leases. A total of 1,551 meters were drilled.

Nine holes intersected ore grade zinc mineralization and

additional new resource of 69,000 dmt was delineated

with an average grade of 14.3% zinc.

Since the existing mining leases still have high

potential for additional zinc silicate, additional exploration

drilling will be carried in future.

2. Special Prospecting Licenses Area

Exploration within the SPL's during the year 2004

has been progressive. Deep soil samplingwas undertaken.

An initial diamond drilling programmed testing targets

has been encouraging in some areas. Additional infill

diamond drilling especially zinc sulphide targets will be

followed up in 2005.

• Regional Exploration

1. Exploration in Thailand

Because it is critical for the long term sustainability

of the company, Padaeng maintained a sustained effort

of exploration in Thailand while facing increasing

administrative delay. Most of the identified areas with

potential are presently awaiting the approval of the lease

applications.

The mineral resource can be converted to reserves

of about 3,554,000 dmt @ 12.7% zinc. Padaeng Mine

now has sufficientmining resourceto sustainan expanded

mining operation of over 400,000dmt of ore per year for

the next 9 yearswhileadditional ore resources are being

explored.


2. Loei Copper Project

Puthep Company Limited, one of our affiliates has

joined efforts with the Australian mining company, Pan

Australian Resources, in order to develop the copper

deposits at PUT1 and PUT2 near Loei province. At PUT

1 the current resource is 80 million dmt @0.5% Copper

at a cut-off grade of 0.1% Copper. At PUT 2 the current

resourceis 32 milliondmt @ 0.4% Copper at 0.1%Copper

cut-of f. The Cabinet has granted access since June

2004 to 1A water shed for the feasibility study and given

in-principle approval for mining application but subject

to some conditions that have not been finalized yet.

3. Kaiso Project - Lao People's Democratic

The Kaiso Mining Lease expired on June 2004.

The proposal for extension of ML has been made for

another 3 years. Laos Government has approved it since

September 2004.

Padaeng (Laos) has applied to expand the current

exploration area to be 800 square kilometers for another

five years.

Table 2: Summary of Mae Sot Mining and Exploration Tenements

License Number Type Area (Ha) Date Granted Expiry Date

20780/13286 ML 14.36 18/10/1982 17/10/2007

20781 /13285 ML 11 .46 18/10/1982 17/10/2007

20782/13287 ML 14.22 18/10/1982 17/10/2007

25697/14388 ML 0.89 30/04/1991 29/04/2008

30769/15525 ML 39.38 11/07/2002 10/07/2017

1/ 2547 MLA 47.77 On going

1/ 2545 SPL 1,600.00 25/03/2002 24/03/2004

2/2545 SPL 1,120 .00 25/03/2002 24/03/2004

3/2545 SPL 1,600.00 25/03/2002 24/03/2004

1/2545 SPLA1 786,72 09/2004

2/2545 SPLA1 1,487.68 09/2004

3/2547 SPLA2 900.00 11/2004

* Note : ML = Mining Lease

MLA = Mining Lease Application at Hualon, applied since March 2004

SPL = Special Prospecting License

SPLA1 = Re-applied New Special Prospecting Licenses since October 2002

Approved by the Mineral Act Committee since June 2004

SPLA2 = Re-applied New Special Prospecting License since April 2004

Approved by the Mineral Act Committee since October 2004

17Padaeng Industry


Environment and Safety

The company has a strong commitment to encompass continuous improvement of its

management systems for environment, health and safety.

The Calcine plant has received the first recertification of ISO 14001 on January 2004 and

is going to upgrade to the new version of ISO 14001:2004 and will integrate the three systems

of ISO ‹9001, TIS/OHSAS‹ 18001 and ISO‹ 14001 into a single management system within year 2005.

The Smelter will finalize the implementation of ISO 14001 by end 2005 while the Mine

will launch the process this year.

After the heavy investments of 2003, Baht 53 million were invested again in 2004 in

environment related projects, mainly for the decommissioning of the ponds at the smelter.

The company has repeatedly provided seminars and training courses in health, safety and

the environment to educate employees about accident prevention and safe working practices,

including emergency response procedures and loss prevention. It is to be stressed that the

Calcine plant achieved zero accidents for five consecutive years.

Environment,Safety, Personnel and Community Relations


The Cadmium Issue at Mae Sot

Early 2004, a study revealed high levels of cadmium contamination in the rice crops from

two villages in the Mae Sot district. The company commissioned the National Research Center

for Environmental and Hazardous Waste Management at Chulalongkorn University to investigate

the causes of the cadmium presence in the environment and observe its potential effect on

the community. Findings are expected by early March 2005.

In parallel, the company has tightened measures to protect against pollution, ensuring that

all treated water emissions from the mine concession are harmless even during times of heavy

rainfall

In addition, the company has committed to participate to the search of solutions and

participated actively to all study groups concerned . It has proposed that the Faculty of Medical

Science at Chulalongkorn University conduct a joint study with the Mae Sot Hospital in Tak

province to study further the extent and mechanism of kidney disease among the villagers of

the area, in order to protect and treat them against the illness.

(More information can be found on our website)

19Padaeng Industry



Personnel

Staff training and development continued at all level,

emphasizingknowledge, skills and efficiency to ensure sufficient

capabilityin responseto changingcircumstancesand competitive

conditions.

With the acknowledgement that human resources are

the most importance factor in maintaining continuing growth,

programs are underway to develop leaders at various levels,

especially for supervisor and above. In parallel, the employees

were encouraged to develop their capabilities through in-house

training courses and on the job training program.

The company's total workforce consists of 746 em-

ployeesof which89 employeesat Bangkokoffice,423 employees

at Tak smelter,144 employeesat Mae Sot mine and 90 employees

at the Calcine plant at Rayong. The average age of employees

is 39 years, while average tenure of service with the company

is 13 years. In 2004, the employee turnover rate equaled 3.08%.

Community Relations

To be successful in business means more than merely providing a high

quality product and satisfying the customers. Helping to build a strong society

and providing a secure livelihood, education and health to the community are

both societal objectives that the company believes are just as important as

business objectives. For this reason, the company initiates and participates in

numerous community assistance and development activities each and every

year. These activities include those specified in the annual work plan as well

as those made necessary or crucial for the the community by unexpected

natural disasters

In 2004, the company allocated approximately Baht 4 million towards

community assistance programs and development activities.

Education

• Awarding annual academic scholarships, student uniforms and school

materials totaling Baht 1.5 million

• Donating 12 sets of computers to local schools in Tak province

• Constructing an audio-visual room in the Knowledge Development Project

at the Padoong Panya School in Tak province

• Providingfunding for various School Lunch Projects includingthe Vegetable

Garden and the Poultry Farm Projects at 12 area schools in Tak province

21Padaeng Industry


Public Health and Public Welfare

• Providing funding to renovate 2 intensive care units at the King Taksin

Maharaj Hospital in Tak province

• Supporting projects to develop agricultural careers in Pratad Padaeng

sub-district of Tak province by contributing to the farming materials fund

for planting soybeans of the local women's farmers groups in the Mae

Tao Mai village and Pa Dae village

• Supporting fund to the Mae Tau MetropolitanPolice Station in Tak province.

• Company employees, as members of the “Padaeng Volunteer Group”worked with local residents to renovate classrooms and playground at

various schools in Tak province

• Mobilizedassistance,heavy machineryand manpower to transport wreckage

and aid residents in Mae Ramat district of Tak province, who suffered as

a result of flooding and mudslides, with coordination efforts totaling over

Baht 600,000

• Donating Baht 200,000 to the Ministry of Industry to aid in relief efforts

for victims of the Tsunami disaster in 6 southern provinces of Thailand


Unit 2004 2003 2002 2004 2003 2002

SAFETY INDICATORS

Frequency rate accidents /million working hours 3.36 2.54 0.84 0 0 0

Severity rate lost days /million working hours 24.35 24.55 9.22 0 0 0

No of employees number 559 542 559 90 93 111

INPUT INDICATORS

Total materials used metric tons / y 305,247 310,270 290,001 111,463 109,377 132,496

Total energy consumption gigajoule 1,966,306 1,973,251 1,807,424 19,546 20,721 28,252

Total water consumption 1,000 m3/y 1,638 1,597 1,628 215 204 209

OUTPUT INDICATORS

Produced waste

Total waste produced wet metric tons / y 600,779 635,688 591,222 571 464 661.57

Disposal % 100 99.997 100 91.8 83 6.8

Emissions to water

Total emitted process waters 1,000 m3/ y 180 786 751 54 41 49

Total emitted metals kg / y 43 117 125 84 83 18

Total metal toxic unit load toxic unit kg 1,566 6,620 5,423 1,493 1,493 545

Emissions to air

Total emitted metals kg / y 1,362 612 3,041 18 127 25

Total metal toxic unit load toxic unit kg 1,375 623 3,053 55 145 110

Total emitted SOx metric tons / y 344 280 311 181 165 218

Total acid deposition emissions 103 acid equivalents 11,726 11,644 na 6 5 7

ENVIRONMENTAL PERFORMANCE INDICATORS

Compliance & incidents

Violations number 2 1 0 1 0 1

Reported incidents number 0 0 0 0 0 1

Landfills

Landfill covered / landscaped in reporting year % 100 100 100 0 0 0

Cumulative landfill covered / landscaped % 38.25 32.42 20.78 0 0 0

SOCIETAL INDICATORS

Complaints about noise number 0 0 0 0 0 0

Complaints about odour number 0 1 0 0 0 1

Total nuisance complaints number 0 1 0 0 0 0

FINANCIAL INDICATORS

Environmental investment and operating costs

Total environmental investment costs (million baht) 52 29 46 0.9 0 2

Total environmental operating costs (million baht) 92 80 75 8.9 12 9

na : not available 0 : measured or calculated

Indicator Measurement Zinc Smelter Calcine Plant

23Padaeng Industry


Management Report and Analysis of Financial Status and Operating Performance

The company's operating result improv ed

significantlyin 2004 despite higher costs of raw materials,

freight, electricity and the reduction of duties. Not only

did the company bank on the production of its mine

that was sustained by the recent investment in a flotation

plant but it also benefited from the increasing demand

on the local market.

Revenue from Sales

While the overall sales in volume changed slightly

to 113,708 mt, the domestic share increased to 96,863

mt or 85% (vs 80% in 2003). Marketing of high value

products increased to 40% of the total sales (vs 38%

in 2003).

Acid sales progressedby 20%,‹ reaching98,773mt.

Total revenues from sales improved 17% to Baht

5,674 million.

Profitability

The company's operating profit totaled Baht 248

millionfromBaht 39 millionone year earlier.The company's

net profit for the year reached Baht 217 million compared

to a quasi breakeven performance on the previous year.

The consolidatedprofit after attributionto minorities

is Baht 217 million or Baht 0.96 per share.

Balance Sheet

Assets & Liabilities

The company's assets totaled Baht 4,905 million

or a 4.3 % decrease compared to 2003. These amounts

are in line with lower inventories of raw material and

reduced requirement for new fixed assets. Total liabilities

decreased by Baht 438 million to Baht 1,852 million

with the major changes being an increase of Baht 88

Shareholder's Equity

Net equity of the company progressed by Baht

218 million to Baht 3,053 million (Baht 3,058 million

company). After Baht 10 million appropriation to the

legal reserve, retained earnings are above Baht 177

million (Baht 186 million company).

Cash Flow & Capital Expenditure

Consolidated cash flow from operations before

changes in assets and liabilities reached Baht 618million,

from Baht 337 million in 2003. Total net cash provided

by operating activitieshas a Baht 672 million contribution

at Company level and Baht 750 million in the consolidated

accounts.

Baht 231 million have been paid for purchase of

fixed assets and mining intangibles. Main investments

in fixed assets related to the proper ties, plants and

equipmentsmaintenance,some expansion of the Smelter

as well as further improvement of the flotation plant.


million in long term debts and a Baht 427 million

contraction of the shor t term debts together with a

reduction of trade payables and intercompanies.

The company makes every effort to conduct its business thoroughly and efficiently so as to protect

itself from internal and external factors, which may affect operations or financial status.

Changes in Zinc Price and Exchange Rate

Any change in zinc price, as quoted daily on the London Metal Exchange (LME), and exchange rate

will have an impact on the company's revenues since both purchase and selling prices are linked to the

LME price and expressed in USD currency. As such the fluctuations in LME zinc price and the USD/Baht

exchange rate can be considered as the main structural risk of the company.

In order to reduce the impact of such factors the company is hedging the purchases and sales in

dollar terms and has been studying transactional hedging for the metal risk. On the other hand, the

company benefits for a good part of a maximum usage of unpaid concentrates from the Mae Sot Mine.

Safeguarding Our Competitiveness

Until recently, the Thai government imposed an import duty of 10% on zinc, protecting the company

to some degree from foreign competitors who have a lower cost base than Thailand. However, current

government implementation of further market liberalization measures in this sector reduced the import duty

on zinc metal to 7.75% during the year and 5.50% at the beginning 2005, causing a significant drop in

the company's revenue. This measure will weaken our protection against better protected Asian producers.

Nevertheless, the company has the ambition to maintain a leader position on the domestic market

and to keep growing its market share in the region. It will therefore take advantage of its own raw material

source and of its customer driven marketing.

Risk Involved in The Investment in Subsidiaries

The company has one significant investment in a subsidiary under a Participation Agreement with

an Australian company. As of last year, the project was pending most of the year waiting for the approval

for land access for further ore sampling prior to a feasibility study. The study will determine if the resource

are economically recoverable.

Environmental Risk

Following the historical Cd-contamination at Mae Sot, future exploration projects will take into account

the control of sediments when performing an industrial activity in a highly Cd/Zn-mineralized area. It

is likely that the feasibility of future mining projects will be impacted and the projects restricted to large

orebodies justifying the costly waste management as done at the Mae Sot Mine.

25Padaeng Industry


Board of DirectorsStrategic Committee and Audit Committee 2004

Mr. Arsa Sarasin

Chairman

Education

• B.A. (Business Administration),

Boston University, U.S.A.

Training

• Director Accreditation

Program (DAP), Thai Institute of

Directors Association

Current Position

• Chairman, Padaeng Industry Public Company Limited • Chairman, Thai Asia Pacific

Brewery Company Limited • Chairman, Siam Makro Public Company Limited • Chairman,

Amata City Company Limited • Chairman of Advisor, Thai-Lao Association for Friendship •The Honorable Chairman of the TOA Group of Companies • Director, Thai Pure Drinks

Company Limited • Director, Thai Tapioca Development Institute • Director and Member of

the Governance and Nomination Committee, The Siam Cement Public Company Limited •Independent Director and Audit Committee Member of Charoen Pokphand Foods Public

Company Limited • Advisor to the Board of Directors of Bangkok Bank Public Company

Limited

Working Experience

• Chief Executive Officer, Padaeng Industry Public Company Limited • Director - General,

Department of Political Affairs, Ministry of Foreign Affairs • Director - General, Department

of Economic Affairs, Ministry of Foreign Affairs • Thai Ambassador to Belgium & Chief of

Mission to the European Community • Thai Ambassador to the U.S.A • The Permanent

Secretary of the Ministry of Foreign Affairs • The Minister of Foreign Affairs • Chairman of

the Asia-Europe Business Forum II • Vice Chairman of the Board of Directors, Bangkok Bank

Public Company Limited • Member of the Board of Director, Vinythai Public Company Limited

• Co-Chairman of the Thai-Lao Association

Mr. Pinit Vongmasa

Director, Chief Executive

Officer and Strategic

Committee Member

Education

• M.S. (Ind. Mgt.), Oklahoma State

University, U.S.A.

• Advance Management Program,

Harvard University, U.S.A.

Training

• Directors Certification Program 2001, Thai Institute of Directors Association

Current Position• Chief Executive Officer, Padaeng Industry Public Company Limited

Working Experience

• President and Chief Executive Officer, Padaeng Industry Public Company Limited •President, The Siam Kubota Industry Company Limited • Managing Director, The

CPAC Concrete Products Company Limited

Current Position

• Managing Director, Padaeng Industry Public Company Limited

Working Experience

• Business Line Manager, Umicore, Angleur, Belgium • Head of Activity Zn Wire &

Dust, Umicore, Angleur, Belgium

Mr. Bernard Tonnon

Director, Managing Director

and Strategic Committee

Member

Education• Master's Degree in Mining

Engineering, Universite Libre de

Bruxelles, Belgium


Training

• The Board's Role in Setting Effective Compensation Policy, Thai Institute of Directors

Association • The Audit Committee... The Expectation Increase and The Responsibility

Expansion, Stock Exchange of Thailand • Director Accreditation Program (DAP), Class

4/2003, Stock Exchange of Thailand and Thai Institute of Directors Association

Current Position• Director, Member of the Audit Committee and Chairman, The Governance and

Nomination Committee, The Siam Cement Public Company Limited • Director and

Chairman of the Audit Committee, Summakorn Public Company Limited • Chairman,

Shin Satellite Public Company Limited • Member, Thailand Industrial Standard Institute

Ministry of Industry • Director, The National Competitiveness Development Board • Academic

Director, The National Economic and Social Development Board • Academic Director,

Thailand Productivity Institute

Working Experience

• President, The Siam Cement Public Company Limited • Chairman, The Federation

of Thai Industries • Senator and Member of National Legislative Assembly • Chairman,

Committee on Economics & Industry of the Senate

Current Position

• Director and Executive Chairman, Bangkok Bank Public Company Limited • Member

of the National Economic and Social Development Board

Working Experience

• The Minister of Finance • The Minister of Industry

Training

• Thai Institute of Directors Association - Directors CertificationProgram2001 - Chairman

2000 - Creating a Strategic Direction

Current Position

• Independent Director and Audit Committee, Christiani & Nilsen (Thai) Public Company

Limited • Director, Continental Petrochemical (Thailand) Co., Ltd.

Working Experience

• Executive Director, Thonburi Automotive Assembly Plant Company Limited • President,

Continental Petrochemical (Thailand) Co., Ltd. • Chief Executive Officer, Aquastar Group

Training• Banff School of Advanced Management, Alberta, Canada • The National Defend

Course for the Joint State -Private Sectors, Class 6, National Defend College • Directors

Certification Program, Class 11/2001, Thai Institute of Directors (IOD) and Australian

Institute of Company Directors (AICO) • Chairman 2000, Class 5/2001, Thai Institute of

Directors (IOD) and Australian Institute of Company Directors (AICO)

Current Position

• Director and Chairman of the Executive Committee, Electricity Generating Public

Company Limited

Working Experience

• Director and Executive Director, The Industrial Finance Corporation of Thailand

• Director and Executive Director, Siam Commercial Bank Public Company Limited •Chairman, Bangkok Commercial Asset Management Company Limited • Executive Chairman,

Bangkok Bank of Commerce Public Company Limited • President, The Industrial

Finance Corporation of Thailand

Mr. Paron Israsena

Independent Director and

Audit Committee Member

Education

• Master of Science (M.E.),

Massachusetts Institute of

Technology (MIT), U.S.A.

Mr. Kosit Panpiemras

Director

Education

• M.A. (Economics), University of

Maryland, U.S.A.

Mr. Aswin Kongsiri

Independent Director and

Audit Committee Member

Education

• B.A. (Hons.) in Philosophy, Politics

and Economics, Oxford University,

England

27Padaeng Industry


Mr. Vinai Vamvanij

Independent Director, Audit

Committee Chairman and

Strategic Committee Member

Education

• Professional Accountancy,

CPA, Australia

Mrs. Sirinuj Bisonyabut

Director

Education

• MBA., Thammasart University

• B. Sc., Chulalongkorn University

• Certificate of Senior Executive

of Office of the Civil Service

Committee (Class 28)

• Certificate of National Defense

College (Class 44)

• Certificate of King Prajadhipok's

Institute (Class 3)

Current Position

• Inspector of Ministry of Finance • Board of CAT Telecom Public

Company Limited

Working Experience

• Deputy Director -General, Excise Department • Director, Office of

Tax Administration 2, Excise Department • Senior Tax Technical Officer,

Bureau of Tax Administration 1 and 2, Excise Department

Current Position

• Executive Vice President (Zinc), Umicore, Belgium

Working Experience

• Corporate Vice - President HR & Strategy, Umicore, Belgium • Management

Consultant, McKinsey & Company, Belgium

Current Position

• Chairman, Umicore, Belgium

Working Experience

• Chief Executive Officer, Eternit, Belgium • Chief Executive Officer,

Bekaert Group, Zwevegem • Chief Executive Officer, Union Miniere, Belgium

• Chief Executive Officer, NMBS/SNCB (Belgian Railways), Belgium

Board of Directors

(Resigned during the year)

1. Mr. Andre R. van der Heyden

Director, Managing Director

and Strategic Committee Member

2. Mrs. Naengnoi Na Ranong

Director

Education

• Master's Degree in Metallurgical

Engineering, Universite Catholique de

Louvain (UCL), Belgium

Working experience

• Managing Director, Padaeng Industry Public Company Limited

• Senior Vice President Zinc, Union Miniere, Belgium

Education

• B.Sc. (Economics), Chulalongkorn University

Training

• Director Accreditation Program (DAP),

Thai Institute of Directors Association

• Customs International Executive Management

Programme 1999, Australia

• Executive Training Course, Class 30, Office

of the Civil Service Commission

Current Position

• Deputy Secretaries-General to the Prime Minister for Administer Affairs,

The Secretariat of the Prime Minister

Working experience

• Deputy Director-General, Customs Department

• Director of Human Resources Management Bureau, Customs Department

• Committee to the AD HOC Committee on "Customs Cooperation

Council Protection Law B.E. 2542, The House of Representative

• Director of Policy and Planning Bureau, Customs Department

• Minister Counselor (Customs), Royal Thai Embassy, Brussels, Belgium

Mr. Karel Vinck

Director

Education• Master's Degree in Electrical

and Mechanical Engineering,

Katholieke Universiteit Leuven

(KUL), Belgium

• Master of Business Administration,

Cornell University, U.S.A.

Dr. Jean-Luc Deleersnyder

Director and Strategic

Committee Member

Education

• Master's Degree in

Electromechanical Engineering

and Ph.D. in Operations

Management, Rijksuniversiteit

Gent. (RUG), Belgium

Board of DirectorsStrategic Committee and Audit Committee 2004


Current Position

• Member of the Umicore Executive Committee, Belgium • Vice President

Corporate Development, Umicore, Belgium

Working Experience

• Managing Director, Sogemin Metals Ltd., London, England • Chief

Financial Officer, Sogem s.a., Brussels, Belgium • Managing Director, Sogem

Far East Ltd., Hong Kong • Executive Vice-President, Sogem Afrimet Inc.,

New York, U.S.A.

Mr. Michel Moser

Director

Education

• Master's Degree in Commercial

Engineering, Ecole de Commerce

Solvay (ULB), Belgium

• Post graduat en commerce

international, Ecole de Commerce

Solvay (ULB), Belgium

• Finance for Executives, INSEAD,

Fontainebleau

Dear Shareholders,

The Audit Committee comprises three independent directors, Mr. Vinai Vamvanij as Chairman, Mr.

Aswin Kongsiri and Mr. Paron Israsena.

In 2004, the Audit Committee has met quarterly with the external auditor, the internal auditor and

the management to review the consolidated and company financial statements to ensure conformity with

the regulations of SEC, SET and with the generally accepted accounting principles of Thailand before

submission to the board. The Audit Committee has also held the meeting with the internal auditor and the

management to assess the company's internal control and risk management with emphasis on such issues

as connected parties transactions and proper disclosure of information in such area for transparency and

good corporate governance. In this respect, the Audit Committee is of the opinion that the company's

operations have been appropriate and has found no significant weaknesses in its conduct of business.

In 2005 the company will continue striving for improvement of the internal control system with

the aim to boost efficiency, effectiveness and identifying of weakness in the system and implementation

of solution to eliminate them.

The Audit Committee has recommended to the Board of Directors to propose to the shareholders

to reappoint Certified Public Accountants of PricewaterhouseCoopers ABAS Ltd. to conduct the audit of

financial statements for the company and its subsidiaries for the year 2005.

(Mr. Vinai Vamvanij)

Chairman of the Audit Committee

25 February 2005

Audit Committee's Statement

29Padaeng Industry


To the Shareholders and the Board of Directors of Padaeng Industry Public Company Limited

I have audited the accompanying consolidated and company balance sheets as at 31 December2004 and 2003 and the related consolidated and company statements of income, changes in shareholders'equity and cash flows for the year then ended of Padaeng Industry Public Company Limited and itssubsidiaries, and of Padaeng Industry Public Company Limited, respectively. These financial statementsare the responsibility of the Company's management. My responsibility is to express an opinion on thesefinancial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standardsrequire that I plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An audit also includes assessing theaccounting principles used and significant estimates made by management, as well as evaluating theoverall financial statements presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated and company financial statements referred to above present fairly,in all material respects, the consolidated and company financial position as at 31 December 2004 and2003, and the consolidated and company results of operations, and cash flows for the year then endedof Padaeng Industry Public Company Limited and its subsidiaries, and of Padaeng Industry Public CompanyLimited, respectively, in accordance with generally accepted accounting principles.

Suchart LuengsuraswatCertified Public Accountant (Thailand) No. 2807

PricewaterhouseCoopers ABAS Limited

Bangkok4 February 2005

Auditor's Report

31Padaeng Industry


32Padaeng IndustryPublic Company LimitedAnnual Report 2004

Assets

Current assets

Cash and cash equivalents 3 441,677,104 231,267,799 325,879,711 194,553,781

Trade accounts receivable - net

- other parties 4 235,095,679 237,569,591 228,096,854 233,382,326

- related parties 24 (iv) 22,578,804 27,333,269 23,168,198 28,029,827

Short‹ - ‹term loans and advances to

related parties - net 24 (v) - - 10,934,667 10,605,002

Inventories - net 5 1,344,873,736 1,532,783,426 1,344,780,013 1,532,703,980

Withholding tax 47,680 449,364 47,680 193,483

Account receivable - revenue department 80,710,480 106,322,079 80,679,318 106,187,492

Other receivables 35,077,973 6,823,153 35,077,973 6,823,153

Other current assets 27,895,507 49,737,363 27,620,862 49,603,405

Total current assets 2,187,920,963 2,192,286,044 2,076,285,276 2,162,082,449

Non - current assets

Investments in subsidiaries - net 6, 24 (i) - - 358,934,364 357,093,647

Property, plant and equipment - net 7 2,427,094,495 2,602,511,407 2,429,905,770 2,605,151,642

Exploration and acquisition costs 8 277,032,327 306,344,039 113,114,836 142,426,548

Other non - current assets 9 12,983,853 24,193,654 12,928,853 24,138,654

Total non - current assets 2,717,110,675 2,933,049,100 2,914,883,823 3,128,810,491

Total assets 4,905,031,638 5,125,335,144 4,991,169,099 5,290,892,940

BalanceSheets

As at 31 December 2004 and 2003

The notes to the consolidated and company financial statements on pages 40 to 61 are integral part of these financial statements.

Consolidated Company

Notes 2004 2003 2004 2003

Baht Baht Baht Baht

Mr. Pinit Vongmasa


33Padaeng Industry


Liabilities and shareholders' equity

Current liabilities

Loans from financial institutions 10 283,819,241 813,105,370 283,819,241 813,105,370

Trade accounts payable

- other parties 412,997,555 508,147,871 412,984,821 507,805,765

- related paries 24 (iv) 813,981 10,863,543 923,691 94,837,458

Current portion of payable

for concession assets acquired 12 - 19,451,288 - 19,451,288

Current portion of payable for

land use compensation 13 11,061,405 11,061,405 11,061,405 11,061,405

Current portion of long‹-‹term loans 14 102,500,000 - 102,500,000 -

Current portion of hire purchase payable 1,893,022 - 1,893,022 -

Short - term loans

from related parties 24 (vi) - - 90,000,000 90,000,000

Accrued interest expenses

- other paries 1,864,844 2,088,984 1,864,844 2,088,984

- related paries 24 (vi) - - 157,808 236,712

Accrued electricity expenses 184,626,172 164,452,697 184,626,172 164,452,697

Other current liabilities 11 276,766,424 255,655,320 267,503,505 245,817,873

Total current liabilities 1,276,342,644 1,784,826,478 1,357,334,509 1,948,857,552

Non‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹ ‹-‹‹‹‹‹‹‹‹‹‹‹‹‹‹ ‹current liabilities

Long‹‹‹‹ ‹-‹‹‹‹‹‹‹‹ ‹term payable for

land use compensation 13 - 11,061,405 - 11,061,405

Long‹-‹term loans 14 547,500,000 450,000,000 547,500,000 450,000,000

Hire purchase payable 3,866,978 - 3,866,978 -

Deferred gain on hire purchase 2,679,459 4,210,578 2,679,459 4,210,578

Provisions for restoration expense 15 21,543,364 40,148,165 21,543,364 40,148,165

Total non‹‹ ‹‹‹-‹‹‹‹‹‹‹‹‹‹‹‹‹‹ current liabilities 575,589,801 505,420,148 575,589,801 505,420,148

Total liabilities 1,851,932,445 2,290,246,626 1,932,924,310 2,454,277,700


Notes 2004 2003 2004 2003

Baht Baht Baht Baht


BalanceSheets

ContinueAs at 31 December 2004 and 2003


Shareholders' equity

Share capital

Authorized share capital‹

226,000,000 ordinary shares

of Baht 10 each 16 2,260,000,000 2,260,000,000 2,260,000,000 2,260,000,000

Issued and paid‹ - ‹up share capital

226,000,000 ordinary shares

of Baht 10 each, fully paid 2,260,000,000 2,260,000,000 2,260,000,000 2,260,000,000

Premium on share capital 602,413,600 602,413,600 602,413,600 602,413,600

Retained earnings (deficit)

Appropriated - legal reserve 17 9,791,560 - 9,791,560 -

Unappropriated retained earnings (deficit) 177,051,291 (30,183,840) 186,039,629 (25,798,360)

Total company shareholders' equity 3,049,256,451 2,832,229,760 3,058,244,789 2,836,615,240

Minority interest 3,842,742 2,858,758 - -

Total shareholders' equity 3,053,099,193 2,835,088,518 3,058,244,789 2,836,615,240

Total liabilities and shareholders'‹e‹quity 4,905,031,638 5,125,335,144 4,991,169,099 5,290.892,940


Notes 2004 2003 2004 2003

Baht Baht Baht Baht


BalanceSheetsContinueAs at 31 December 2004 and 2003

35Padaeng Industry


Revenues from sales‹ and‹ services 26 5,673,814,586 4,835,856,148 5,663,727,552 4,827,968,779

Cost of sales‹ and‹ services‹ (4,904,783,584)(4,406,103,502)(4,900,113,919) (4,405,359,704)

Gross profit 769,058,002 429,752,646 763,613,633 422,609,075

Selling and administrative expenses 18 (532,903,358) (467,241,510) (525,459,725) (449,668,844)

Profit from sales 236,154,644 (37,488,864) 238,153,908 (27,059,769)

Other revenues 18,854,234 27,482,280 15,808,313 18,064,710

Gain (loss) on exchange rate 18,252,913 67,141,038 18,296,547 67,806,905

Inventory revaluation loss 5 207,492 (207,492) 207,492 (207,492)

Early retirement expense - (13,694,401) - (13,694,401)

Impairment expenses 7,‹18 (21,218,479) 293,597 (21,218,479) 293,597

Directorsû remuneration (3,593,913) (3,790,000) (3,593,913) (3,790,000)

Other expenses (447,831) (1,073,105) (447,831) (1,073,105)

Profit from operations 248,209,060 38,663,053 247,206,307 40,340,445

Share of gain (loss) from subsidiaries

on equity method 6 - - 1,840,717 1,360,845

Profit before finance costs and income tax 248,209,060 38,663,053 249,046,754 41,701,290

Finance costs - net 19 (26,525,533) (38,121,600) (27,417,205) (38,903,401)

Income tax (3,672,852) (358,522) - -

Profit before minorities 218,010,675 182,931 221,629,549 2,797,889

(Profit) attributable to minorities (983,984) (180,090) - -

Net profit for the year 217,026,691 2,841 221,629,549 2,797,889

Earnings per share

Net profit for the year 20 0.96 0.00 0.98 0.01

Statementsof Income

For the years ended31 December 2004 and 2003



Notes 2004 2003 2004 2003

Baht Baht Baht Baht


Begin

nin

g b

alance 2

004

2,260,000,000

602,413,600

-(3

0,183,840)

2,858,758

2,835,088,518

Appro

priate

d legal re

serv

e17

--

9,791,560

(9,791,560)

--

Net pro

fit

--

-217,026,691

983,984

218,010,675

Endin

g b

alance 2

004

2,260,000,000

602,413,600

9,791,560

177,051,291

3,842,742

3,053,099,193

Begin

nin

g b

alance 2

003

2,260,000,000

602,413,600

-(3

0,186,681)

5,378,668

2,837,605,587

Decre

ase

in s

hare

capital‹

24‹(i)

--

--

(2,700,000)

(2,700,000)

Net pro

fit

--

-2,841

180,090

182,931

Endin

g b

alance 2

003

2,260,000,000

602,413,600

-(3

0,183,840)

2,858,758

2,835,088,518

The n

ote

s to

the c

onso

lidate

d a

nd c

om

pany

financial state

ments o

n p

ages

40 to 6

1 a

re inte

gra

l part o

f th

ese

financial state

ments.

Statements of Changes

in Sharehoders' Equity


Consolidate

d

Issued a

nd

paid

up

share

capital

Baht

Pre

miu

m

on s

hare

capital

Baht

Appro

priate

d

legal re

serv

e

Baht

Unappro

priate

d

Baht

Min

ority

inte

rest

Baht

Tota

l

Baht

Note

s

Reta

ined e

arn

ings (deficit)

Consolidate

d

Issued a

nd

paid

up

share

capital

Baht

Pre

miu

m

on s

hare

capital

Baht

Appro

priate

d

legal re

serv

e

Baht

Unappro

priate

d

Baht

Min

ority

inte

rest

Baht

Tota

l

Baht

Note

s

Reta

ined e

arn

ings (deficit)

Com

pany

Issued a

nd

paid

up

share

capital

Baht

Pre

miu

m

on s

hare

capital

Baht

Appro

priate

d

legal re

serv

e

Baht

Unappro

priate

d

Baht

Min

ority

inte

rest

Baht

Tota

l

Baht

Note

s

Reta

ined e

arn

ings (deficit)

Com

pany

Issued a

nd

paid

up

share

capital

Baht

Pre

miu

m

on s

hare

capital

Baht

Appro

priate

d

legal re

serv

e

Baht

Unappro

priate

d

Baht

Min

ority

inte

rest

Baht

Tota

l

Baht

Note

s

Reta

ined e

arn

ings (deficit)

37Padaeng Industry


Begin

nin

g b

alance 2

004

2,260,000,000

602,413,600

-(2

5,798,360)

-2,836,615,240

Appro

priate

d legal re

serv

e17

--

9,791,560

(9,791,560)

--

Net pro

fit

--

-221,629,549

-221,629,549

Endin

g b

alance 2

004

2,260,000,000

602,413,600

9,791,560

186,039,629

-3,058,244,789

Begin

nin

g b

alance 2

003

2,260,000,000

602,413,600

-(2

8,596,249)

-2,833,817,351

Net pro

fit

--

-2,797,889

-2,797,889

Endin

g b

alance 2

003

2,260,000,000

602,413,600

-(2

5,798,360)

-2,836,615,240

The n

ote

s to

the c

onso

lidate

d a

nd c

om

pany

financial state

ments o

n p

ages

40 to 6

1 a

re inte

gra

l part o

f th

ese

financial state

ments.

Statements of Changes

in Sharehoders' Equity

ContinueFor the years ended

31 December 2004 and 2003


Cash flows from operating activities

Net profit (loss) 217,026,691 2,841 221,629,549 2,797,889

Items to reconcile net income to net cash:

Share of (gain) loss from subsidiaries 6 - - (1,840,717) (1,360,845)

Provision for doubtful debts - other trade account

receivable (reversal) (512,421) 417,011 - -

Provision for doubtful debts - short - term loans

and advances to related companies (reversal) 18 - (20,728,771) - (20,728,771)

Allowance for obsolete inventories 5,500,088 2,336,014 5,500,088 2,336,014

Allowance for diminution of inventories 5 (207,492) 207,492 (207,492) 207,492

Amortization of deferred gain on hire purchase (1,531,119) (382,780) (1,531,119) (382,780)

Withholding tax written - off 440,540 128,773 224,485 -

Other current assets written - off and

amortization expenses - 12,090 - ‹-

Depreciation 7 337,724,334 315,255,107 337,453,734 314,263,751

(Gain) loss on disposal of property, plant

and equipment 929,243 (510,096) 929,243 (510,096)

Provision for impairment released 7 21,218,479 (293,597) 21,218,479 (293,597)

Property, plant and equipment written - off 1,941,652 564,505 1,941,652 564,505

Other assets written - off 38,512,731 - 38,512,731 -

Other assets written - down (reverse) (10,877,389) 6,000,000 (10,877,389) 6,000,000

Other assets amortization expenses 12,619,575 28,929,915 12,619,575 28,929,915

Provisions for restoration expense increase 15 10,702,136 11,793,292 10,702,136 11,793,292

Unrealized exchange loss (gain) (17,824,250) (6,685,461) (17,824,250) (6,685,461)

Minority interest in net profit of subsidiary 983,984 180,090 - -

Cash flows from operations before changes

in operating assets and liabilities 616,646,782 337,226,425 618,450,705 336,931,308

Operating assets (increase) decrease

Trade accounts receivable

- other parties 3,045,100 (20,758,251) 5,344,239 (21,244,548)

- related parties 4,754,465 (8,266,477) 4,861,629 (7,976,556)

Short - term loans to related companies - - (329,665) (242,313)

Inventories 182,653,093 (450,065,514) 182,631,370 (450,036,292)

Withholding tax (440,540) 6,302,078 (224,485) (7,982)

Accounts receivable - revenue department 25,611,599 (17,589,793) 25,508,174 (17,597,785)

Other receivables (28,254,820) (3,342,554) (28,254,820) (3,342,554)

Other current assets 21,024,380 241,514 20,909,187 295,367

Other non - ‹current assets 11,209,801 (10,621,717) 11,209,801 (10,681,337)


Notes 2004 2003 2004 2003

Baht Baht Baht Baht


Statementsof CashFor the years ended31 December 2004 and 2003

Flows

39Padaeng Industry


Operating liabilities increase (decrease)

Trade accounts payable

- other parties (88,312,034) 217,677,472 (87,982,662) 216,519,292

- related parties (10,049,562) 345,533 (93,913,767) (5,061,426)

Accrued interest expenses (224,140) (5,663,892) (303,044) (5,427,180)

Accrued electricity expenses 20,173,475 12,261,363 20,173,475 12,261,363

Other current liabilities 22,356,544 143,931,731 22,931,071 137,781,595

Provision for restoration expense (use of) 15 (29,306,937) (12,568,303) (29,306,937) (12,568,303)

Net cash provided by operating activities 750,887,206 189,109,615 671,704,271 169,602,649

Cash flows from investing activities

Cash received from investment - - - 3,300,000

Cash paid for purchase of property,‹

plant and equipment (189,653,571) (396,515,255) (189,554,011) (396,248,860)

Cash received‹from sales of property,‹

plant and equipment 3,256,776 720,955 3,256,776 720,955

Exploration and acquisition costs (increase) (41,445,899) (64,079,149) (41,455,899) (64,079,149)

Net cash used in investing activities (227,852,694) (459,873,449) (227,753,134) (456,307,054)

Cash flows from financing activities

Loans from financial institution increase (decrease) (517,961,223) 475,502,836 (517,961,223) 475,502,836

Short - term loans from related

parties increase - - - 90,000,000

Proceeds from long - term borrowings 14 200,000,000 450,000,000 200,000,000 450,000,000

Payment on long - term borrowings 14 - (690,000,000) - (690,000,000)

Account payable hire purchase 5,760,000 - 5,760,000 -

Cash paid to minorities for‹capital reduction - (2,700,000) - -

Net cash (used in)/from financing activities (312,201,223) 232,802,836 (312,201,223) 325,502,836

Effects from changes in exchange rate

for cash and‹cash equivalents (423,984) (25,929) (423,984) (25,929)

Net increase (decrease) in cash and cash equivalents 210,409,305 (37,986,927) 131,325,930 38,772,502

Cash and cash equivalents at beginning of year 231,267,799 269,254,726 194,553,781 155,781,279

Cash and cash equivalents at end of year 441,677,104 231,267,799 325,879,711 194,553,781

Supplementary information for statements of cash flows

Cash paid during the year:

Interest paid 21,042,539 60,664,125 26,091,805 61,453,783

Income tax paid 2,889,038 304,258 78,682 97,358

Non - cash items

Hire purchase payable 5,760,000 - 5,760,000 -


Notes 2004 2003 2004 2003

Baht Baht Baht Baht


Statementsof Cash Flows


Continue


1. General information

Padaeng Industry Public Company Limited (the ''Company'') was established on April 10, 1981 and has

been listed on the Stock Exchange of Thailand since July 21, 1987.

The Company's head office is at CTI Tower, 26th-27th floor, 191/18-25 Rachadaphisek Road, Khlong Toei

District,‹Bangkok. The Company operates a silicate mine and a zinc smelter located in Tak Province and a calcine‹‹‹ plant

located in Rayong Province.

The principal business operations of the Company and its subsidiaries are summarised as follows:

Company Principal activities

Padaeng Industry Public Company Limited Mining and refining of zinc, the main products are

zinc ingot and zinc alloy

Subsidiaries Principal activities

Padaeng Properties Co., Ltd. Providing services

Puthep Co., Ltd. Copper exploration

Padaeng Industry (Laos) Co., Ltd. Zinc exploration and mining in Laos

Padaeng International Mining Co., Ltd. Minerals exploration in Vietnam

Sila Enterprise Co., Ltd. Distribution of limestones

South East Asia Metals Co., Ltd. Distribution of various base metals and their by products

During the year 2004, the Company employed 746 employees (2003 : 745 employees).

2. Significant accounting policies

The principal accounting policies adopted in the preparation of these consolidated and company financial

statements are set out below.

2.1 Basis of preparation

The consolidated and company financial statements have been prepared in‹‹ ‹ ‹ accordance with Thai

Generally Accepted Accounting Principles under the Accounting Act B.E. 2543 being those Thai Accounting Standards issued

under the Accounting Profession Act B.E. 2547 and the financial reporting requirements of the Securities and Exchange

Commission under the Securities and Exchange Act B.E. 2535.

The accounting principles applied may differ from Generally Accepted Accounting Principles adopted in

other countries and jurisdictions. The accompanying consolidated and company financial statements are therefore

not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions

other than Thailand.

The consolidated and company financial statements have been prepared under the historical cost

convention except as disclosed in the accounting policies below.

For the convenience of the user, an English translation of the consolidated and company financial

statements has been prepared from the statutory financial statements that are issued in the thai language for

domestic purposes.

2.2 Use of estimates

The preparation of financial statements in conformity with Thai Generally Accepted Accounting Principles

requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,

the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues

and expenses in the reported periods. Actual results may differ from those estimates.

Notesto the Consolidated and

Company Financial Statements

For the years ended 31 December 2004 and 2003

41Padaeng Industry


NotesFor the years ended 31 December 2004 and 2003

to the Consolidated and Company Financial Statements

2. Significant accounting policies (Contûd)

2.3 Revenue recognition

Sales are recognised when title to the goods sold passes to the buyer, which is at the time when the

goods are delivered to the customer or as contractually agreed.

2.4 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents

denominated in foreign currencies are translated at the exchange rate ruling at the end of the year. Cash and cash equivalents

comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments, and bank overdrafts.

2.5 Trade receivables

Trade receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables

based on a review of all outstanding amounts at the year-end. Bad debts are written off during the year in which they

are identified.

2.6 Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is calculated on the weighted

average cost basis. The cost of work in progress and finished goods comprises raw materials cost (zinc sulphide

concentrates and zinc silicates), direct conversion costs, and a proportion of manufacturing overheads based on normal

operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less estimated

conversion costs and the estimated costs incurred to make the sale. Where net realisable value is less than cost, an allowance

for the diminution in value of inventories has been provided.

Spares and consumables are valued on the weighted average cost basis. Provision is made, where necessary,

for obsolete, slow moving and defective inventories based on a review of all outstanding amounts at the year-end.

2.7 Investments in subsidiaries

Investments in subsidiaries are accounted for in the Company (non-consolidated) financial statements by

the equity method of accounting. Subsidiaries are those over which the Company has over 50 % of the voting rights,

or over which the Company exercises control. When necessary, provisions are recorded for any impairment in value

of these investments.

Equity accounting involves recognising in the income statement the Companyûs share of the

subsidiaryûs profit or loss for the year. The Companyûs interest in the subsidiary is carried in the balance sheet at an

amount that reflects its share of the net assets of the subsidiary and includes goodwill, if any, on acquisition.

Additionally, all intercompany transactions, balances and unrealized gains are eliminated unless the loss

cannot be recovered.

2.8 Consolidation

Subsidiary undertakings (see Note 24(i)), which are those companies in which the Company, directly or

indirectly, has over 50 % of the voting rights or otherwise has power to exercise control over the financial and operating

policies, have been consolidated. Subsidiaries are consolidated from the date on which effective control is transferred

to the Company and are no longer consolidated from the date control ceases. All intercompany transactions, balances

and unrealised surpluses and deficits on transactions between companies have been eliminated. Where necessary,

accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Company.

Separate disclosure is made for minority interests in the consolidated balance sheet and consolidated income statement.





2.8 Consolidation (Contûd)

In the Company (non-consolidated) financial statements, the Companyûs share of losses in a subsidiary

is generally recognized only to the extent of the amount of the investment in the subsidiary except where the Company

has a commitment and/or guarantees on behalf of the subsidiary. The resumption of recognition of the Companyûs

equity in profit will begin when the profit in such subsidiary exceeds the Companyûs share of previously unrecognized

losses in excess of investment.

2.9 Related companies

Related companies are holding companies, subsidiaries, fellow subsidiaries, associates and other

companies that are in the same company, including companies that are related by way of common directors, key

management or shareholders. Transactions with related companies have been disclosed in Note 24.

2.10 Property, plant and equipment

Carrying value: Property, plant and equipment are recorded at cost. Cost is measured by the cash

or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended

use. In the case of self-constructed assets, the cost of construction consists of the materials, direct labour and other

expenses attributable to the construction which are allocated to the assets on a systematic basis. Property, plant and

equipment, except land, are presented in the balance sheet at cost less accumulated depreciation. Land is not depreciated.

Depreciation is calculated on a straight line method to write off the cost of each asset, or its revalued

amount, to their residual values over their estimated useful life as follows:

years

Land improvement 5-20

Building 20-25

Machinery and heavy equipment 8-20

Equipment, furniture and fixtures and vehicles 5

Mining concession fees and expenses 5-16

Other structures 8-25

Residue ponds brought into operation after 1 January 2001 are amortised on a units of production basis

using the capacity volume of the residue ponds.

Finance lease assets are recorded as assets and depreciated over their estimated useful life.

When the Company disposes of property, plant and equipment, the Company will write-off both

the asset and its related accumulated depreciation, and recognise any gain or loss from disposal of the asset through

the statement of income.

Capital expenditures which result in the acquisition of assets, or results in an increase in capacity, useful

life or improves the operating efficiency of existing assets and that are expected to provide future economic benefits,

are capitalised.

Where the carrying amount of an asset exceeds its estimated recoverable amount, it is written

down immediately to its recoverable amount through recording an impairment charge.

2.11 Exploration costs

Exploration is accumulated separately for each area of interest and accounted using the successful efforts

basis of accounting for such costs.

Under this basis, accumulated costs of exploration are capitalized and carried forward on the balance

sheet where one or more of the following conditions are met:




2.11 Exploration costs (Contûd)

- Costs are expected to be recouped through successful development and exploitation of each area of

interest or by sale of the area of interest; and/or

- Exploration activities in the area of interest have not yet reached a stage that permits a reasonable

assessment of the existence of economically recoverable reserves and exploration activities are continuing in the area

of interest.

Upon commencement of development and production, these costs are amortised using the straight line basis

over the period that it is expected to provide economic benefits.

Expenditure which no longer satisfies the above policy is written-off or allowance raised against such expenditure

where management is of the opinion that the carried forward net cost may not be recoverable.

2.12 Environmental restoration costs

Expenditures relating to ongoing environmental restoration programs are charged against earnings as

incurred. Where future costs relating to environmental liabilities have arisen as a result of past events, the Company

establishes a provision over the period in which the obligation is incurred, which is over the useful life of the

related asset. These provisions are made on an undiscounted basis.

Hence, the estimated restoration costs of the Mae Sot mine are accrued over the life of the Mine. The

estimated restoration costs for the residue ponds located at the Tak zinc smelter facility are accrued over the useful

life of the residue ponds.

2.13 Provisions

Provisions are recognised when the Company has a present legal or constructive obligation as

a result‹‹ ‹ ‹ ‹ ‹ ‹ of past events, it is probable that an outflow of resources embodying economic benefits will be required to

settle the obligation, and a reliable estimate of the amount of the obligation can be made.

2.14 Deferred income taxes

The Company does not recognise income taxes payable or receivable in future periods in respect of

temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts

in the financial statements. The accounting standard for deferred income taxes is currently not in effect in Thailand.

2.15 Foreign currency transactions

Foreign currency transactions are accounted for at the exchange rates prevailing at the date of the

transactions. Such balances are translated at year-end exchange rates. Gains and losses resulting from the settlement

of such transactions and from the translation of monetary assets, and liabilities denominated in foreign currencies, are

recognised in the statement of income.

2.16 Financial instruments

Financial assets and liabilities carried on the balance sheet include cash and cash equivalents, trade

accounts receivable, related party receivables and payables, bank overdraft, trade accounts payable, accrued expenses

and loans.

The Company is also party to derivative financial instruments that reduce its exposure to fluctuations

in foreign currency exchange rates with respect to recognised foreign currency assets or liabilities. The derivative

instruments comprise forward foreign exchange contracts, protecting the Company from movements of foreign currency

exchange rates by establishing the rate at which the foreign currency asset or liability will be realised or settled.

Such forward contracts are recorded initially on the balance sheet at cost. Subsequently they are measured at

fair value and gains or losses on these derivatives are recognised in current period income. The fair values are based

on closing exchange quotations.

43Padaeng Industry





2.16 Financial instruments‹ (Contûd)

The Company has also entered into forward derivative contracts to protect the Company from

movements in zinc metal prices and foreign exchange rate changes related to forecasted sales and purchases of zinc

in a future period. Those instruments comprise forward contracts for the sale and purchase of zinc and forward contracts

for the purchase of foreign currencies in substance establishing the prices at which the forecasted zinc purchases will

be carried out. Such derivatives are not recognised on balance sheet at inception, since they relate to future transactions

which are not yet reflected in the financial statements. Gains and losses on those derivative contracts are recognised

in the financial statements upon settlement of the transactions. The fair values of those unrecognised forward contracts

are disclosed in Note 27.1.

2.17 Leases - where a group company is the leassee

Leases of property, plant or equipment which substantially transfer all the risks and rewards of ownership

are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair‹‹ value

of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the

principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding

rental obligations, net of finance charges, are included in other ‹long-term payables. The interest element of the finance

cost is charged to the statement of income over the lease period so as to achieve a constant periodic rate of interest

on the remaining balance of the liability for each period. The property, plant or equipment acquired‹ under finance leases

is depreciated over the shorter of the useful life of the asset or the lease term.

Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified

as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged

to the statement of income on a straight-line basis over the period of the lease. When an operating lease is terminated

before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised

as an expense in the period in which termination takes place.

3. Cash and cash equivalents

Cash and cash equivalents as at 31 December 2004 and 2003 comprise:

‹ ‹ ‹ ‹ ‹ ‹ ‹‹ Consolidated‹ ‹‹ ‹‹‹ Company

2004 2003 2004 2003

Baht Baht Baht Baht

Cash on hands and deposits with banks 333,677,104 181,267,799 220,879,711 144,553,781

Promissory note/Bill of exchange 105,000,000 50,000,000 105,000,000 50,000,000

Total 441,677,104 231,267,799 325,879,711 194,553,781

The average interest rates on deposits and short-term investments are in the range of 0.25% - 1.65%.

4. Trade accounts receivable, net

‹ ‹‹‹‹‹ Consolidated‹ ‹ ‹‹ ‹ ‹Company

2004 2003 2004 2003

Baht Baht Baht Baht

Trade accounts receivable 238,081,163 241,067,496 228,212,752 233,498,224

Less: Allowance for doubtful‹‹‹‹‹‹‹ accounts (2,985,484) (3,497,905) (115,898) (115,898)

Trade accounts receivable, net 235,095,679 237,569,591 228,096,854 233,382,326

As at 31 December 2004 and 2003 the following accounts receivables were past due more than three months.




4. Trade accounts receivable, net (Contûd)


2004 2003 2004 2003

No. Baht No. Baht No. Baht No. Baht


- Other companies

Current to 3 months 73 233,460,831 67 235,414,995 41 228,096,854 37 233,382,326

3 to 6 months 8 918,611 14 1,610,674 - - - -

6 to 12 months 4 499,348 3 812,739 - - - -

More than 12 months 11 3,202,373 15 3,229,088 1 115,897 1 115,898

238,081,163 241,067,496 228,212,751 233,498,224

Less: Allowance for doubtful

‹‹‹‹ accounts (2,985,484) (3,497,905) (115,897) (115,898)


- other companies, net 235,095,679 237,569,591 228,096,854 233,382,326

5. Inventories - net


2004 2003 2004 2003

Baht Baht Baht Baht

Raw materials 253,334,062 536,427,811 253,334,062 536,427,811

Spares and consumables 232,605,769 192,722,456 232,605,769 192,722,456

Goods in transit 368,091,494 436,190,447 368,091,494 436,190,447

Work in process 286,353,641 268,444,348 286,353,641 268,444,348

Finished Goods 241,097,701 130,350,698 241,039,978 130,271,252

1,381,482,667 1,564,135,760 1,381,424,944‹ ‹‹‹ ‹1,564,056,314

Less : Allowance for obsolete and

slow moving inventories (36,644,931) (31,144,842) (36,644,931) (31,144,842)

Inventory revaluation loss - (207,492) - (207,492)

Inventories, net 1,344,837,736‹‹ 1,532,783,426‹‹‹‹ ‹‹‹‹ ‹ ‹‹ 1,344,780,013‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹

Inventory revaluation loss is computed based on an analysis of the cost of inventory and its net realisable

value based on current market prices of product less applicable selling costs.

6. Investments in subsidiaries‹‹‹‹‹‹‹‹‹‹ -‹‹‹‹‹‹‹‹‹‹‹‹‹‹ net

Subsidiaries Consolidated Company

2004 2003 2004 2003

Baht Baht Baht Baht

Opening net book amount - - 357,093,647 359,032,802

Share of results before tax - - 5,513,569 1,719,367

Share of tax - - (3,672,852) (358,522)

Net share of results - - 1,840,717 1,360,845

Reduction in share capital

(Note 24 (i)) - - - (3,300,000)

Closing net book amount - - 358,934,364 357,093,647

Net equity in principal subsidiary companies are shown in Note 24 (i).

1,532,703,980

45Padaeng Industry



to the Consolidated and Company Financial Statements7.

Pro

perty, plant and e

quip

ment - net

Consolidate

d

Buildin

g

Land a

nd

Machin

ery

Equip

ment,

and e

quip

ment

land

and h

eavy

furn

iture

Oth

er

under

impro

vem

ent

Buildin

gequip

ment

and fixtu

res

Vehicles

structu

res

construction

Tota

l

Baht

Baht

Baht

Baht

Baht

Baht

Baht

Baht

At 31 D

ecem

ber 2003

Net book a

mount

455,388,143

695,453,849

1,310,721,335

52,262,915

27,229,398

14,791,498

46,664,269

2,602,511,407

Year ended 3

1 D

ecem

ber 2004

Opening b

alance

455,388,143 695,453,849

1,310,721,335

52,262,915

27,229,398

14,791,498

46,664,269

2,602,511,407

Additions

--

-2,144,015

--

187,509,556

189,653,571

Transfers

16,966,483

4

,423,525

138,329,517

7,164,602

17,858,668

-(1

84,742,795)

-

Disposa

ls-

(5,278)

(2,862,955)

(93,612)

(1,224,160)

(13)

-(4

,186,018)

Write

- o

ffs

--

(1,932,964)

(8,684)

(4)

--

(1,941,652)

Closing b

ook a

mount

472,354,626

699,872,096

1,444,254,933

61,469,236

43,863,902

14,791,485

49,431,030

2,786,037,308

Less

:Depre

ciation e

xpense

(25,066,103)

(73,268,251)

(199,691,928)

(26,198,198)

(8,408,216)

(5,091,638)

-(3

37,724,334)

Pro

vision for im

pairm

ent

(form

ed) re

lease

d-

-(1

8,496,817)

(2,721,662)

--

-(2

1,218,479)

Net book a

mount

447,288,523

626,603,845

1,226,066,188

32,549,376

35,455,686

9,699,847

49,431,030

2,427,094,495

At 31 D

ecem

ber 2004

Cost

662,548,792

1,560,485,736

4,388,097,390

348,958,063

176,085,818

30,892,695

49,431,030

7,216,499,524

Less

:Accum

ulate

d

depre

ciation

(211,951,525)

(933,769,505)

(3,002,760,976)

(312,169,808)(1

40,447,010)

(21,192,848)

- (4

,622,291,672)

Accum

ulate

d p

rovision

for im

pairm

ent

(3,308,744)

(112,386)

(159,270,226)

(4,238,879)

(183,122)

--

(167,113,357)

Net book a

mount

447,288,523

626,603,845

1,226,066,188

32,549,376

35,455,686

9,699,847

49,431,030

2,427,094,495




7.

Pro

perty, plant and e

quip

ment - net (C

ontûd)

Com

pany

Land a

nd

Machin

ery

Equip

ment,

Buildin

g a

nd

land

and h

eavy

furn

iture

Oth

er

under

impro

vem

ent

Buildin

gequip

ment

and fixtu

res

Vehicles

structu

res

construction

Tota

l

Baht

Baht

Baht

Baht

Baht

Baht

Baht

Baht

At 31 D

ecem

ber 2003

Net book a

mount

458,898,081

695,453,849

1,310,721,334

52,009,168

26,613,443

14,791,498

46,664,269

2,605,151,642

Year ended 3

1 D

ecem

ber 2004

Opening b

alance

458,898,081 695,453,849

1,310,721,334

52,009,168

26,613,443

14,791,498

46,664,269

2,605,151,642

Additions

--

-2,044,455

--

187,509,556

189,554,011

Transfers

16,966,483

4

,423,525

138,329,517

7,164,602

17,858,668

-(1

84,742,795)

-

Disposa

ls-

(5,278)

(2,862,955)

(93,612)

(1,224,160)

(13)

-(4

,186,018)

Write

- o

ffs

--

(1,932,964)

(8,684)

(4)

--

(1,941,652)

Closing b

ook a

mount

475,864,564

699,872,096

1,444,254,932

61,115,929

43,247,947

14,791,485

49,431,030

2,788,577,983

Less

:Depre

ciation e

xpense

(25,066,103)

(73,268,251)

(199,691,927)

(26,120,035)

(8,215,780)

(5,091,638)

-(3

37,453,734)

Pro

vision for im

pairm

ent

(form

ed) re

lease

d-

-(1

8,496,817)

(2,721,662)

--

-(2

1,218,479)

Closing n

et book a

mount

450,798,461

626,603,845

1,226,066,188

32,274,232

35,032,167

9,699,847

49,431,030

2,429,905,770

At 31 D

ecem

ber 2004

Cost

666,058,730

1,560,485,736

4,388,097,390

347,366,654

174,394,950

30,892,695

49,431,030

7,216,727,185

Less

:Accum

ulate

d

depre

ciation

(211,951,525)

(933,769,505)

(3,002,760,976)

(310,853,543)(1

39,179,661)

(21,192,848)

-(4,619,708,058)

Accum

ulate

d p

rovision

for im

pairm

ent

(3,308,744)

(112,386)

(159,270,226)

(4,238,879)

(183,122)

--

(167,113,357)

Net book a

mount

450,798,461

626,603,845

1,226,066,188

32,274,232

35,032,167

9,699,847

49,431,030

2,429,905,770

47Padaeng Industry




7. Property, plant and equipment - net (Contûd)

Provision for asset impairment

Asset impairment charges represent the write-down in book value of assets whose book values exceeded the

estimated recoverable amount based on a review of the assetûs respective value in use.

Changes in impairment provision movement are shown as follows:

2004 2003 2004 2003

Baht Baht Baht Baht

Opening balances 145,894,878 146,188,475 145,894,878 146,188,475

Provision for impairment reclassified/formed 21,846,336 - 21,846,336 -

Reversal from disposals/write-offûs (627,857) (293,597) (627,857) (293,597)

Ending Balance 167,113,357 145,894,878 167,113,357 145,894,878

8. Exploration and acquisition costs

Exploration and acquisition costs balance comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Exploration costs

Opening balances of the year 178,599,198 172,939,688 31,668,217 26,008,707

Expenditure incurred during the year 30,551,531 24,437,374 30,551,531 24,437,374

Expenditure charged to income statement (21,136,981) (7,429,632) (21,136,981) (7,429,632)

Expenditure transferred to mine properties - (5,348,232) - (5,348,232)

Expenditure written-down (12,879,069) (6,000,000) (12,879,069) (6,000,000)

Ending Balance of the year (Note 8 (i)) 175,134,679 178,599,198 28,203,698 31,668,217

Mining acquisition costs

Capitalized deferred cost

Acquisition cost 100,900,000 100,900,00 100,900,000 100,900,000

Acquisition cost write-off (40,900,000) - (40,900,000) -

Accumulated depletion (6,666,672) (26,143,726) (6,666,672) (26,143,726)

Ending balanse for the year 53,333,328 74,756,274 53,333,328 74,756,274

Special prospect license fee 16,986,510 16,986,510 - -

Land use compensation 11,434,795 13,123,062 11,434,795 13,123,062

Other capitalized expenditure 20,143,015 22,878,995 20,143,015 22,878,995

Ending balance for the year 101,897,648 127,744,841 84,911,138 110,758,331

Total 277,032,327 306,344,039 113,114,836 142,426,548

i) Exploration costs

Exploration costs are mainly related to those incurred by Puthep Co., Ltd., a wholly owned subsidiary. At

the date of these statements, exploration activities had not established whether economically recoverable resources

existed in the area. In accordance with the Companyûs accounting policy for exploration, such costs will

remain capitalized until final determination of whether economically recoverable resource exists.






8. Exploration and acquisition costs (Contûd)

On 21 August 2000, the Company and Puthep Co., Ltd. entered into a Participation Agreement (the "Agreement")

with Pan Australian Resources N.L. and PNA (Puthep) Pty Limited of Australia ("PNA") to undertake exploration

and mining of Puthep Copper Project. Under the Agreement, PNA has the right to a 50% working interest

in the Puthep Project in north-east Thailand by completing a feasibility study to a bankable standard. The Agreement

also includes further options for PNA to acquire a total interest of either 60% or 70%.

PNA must spend a further US$ 1 million to attain approximately a further 15% interest in Puthep Co., Ltd. As

at 31 December 2004, PNA has expended US$ 470,277 (2003: US$ 214,730).

9. Other non - current assets

Other non - current assets as at 31 December 2004 and 2003 comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Deposits 1,230,509 3,146,177 1,175,511 3,091,177

Others 11,698,344 21,047,477 11,753,342 21,047,477

12,928,853 24,193,654 12,928,853 24,138,654

Deposits and installment

payments for condominium units 74,932,723 74,932,723 -‹‹‹‹‹ ‹‹‹‹ ‹-‹

Less : Allowance for doubtful accounts (74,932,723) (74,932,723) - -

Total 12,928,853 24,193,654 12,928,853 24,138,654

Deposits and installment payment for condominium units

A subsidiary has provided an allowance of Baht 75 million with respect to deposit and installment payments for

certain condominium units whose construction was suspended due to unfavorable economic conditions.

Other

The Company has long-term investments in the amount of Baht 14,451,626 that have been fully written‹‹ down

in value.

10. Loans from financial institutions

Loans from financial institutions as at 31 December 2004 and 2003 comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Promissory notes - 350,000,000 - 350,000,000

Trust receipts 283,819,241 463,105,370 283,819,241 463,105,370

Total 283,819,241 813,105,370 283,819,241 813,105,370



49Padaeng Industry




The Company has entered into short-term financing arrangements to fund its operations with various financial

institutions.

The interest rates, the Company is paying on the promissory notes and trust receipts, are in the range of 1.8% -

3.8% and 1.5% - 2.4% respectively.

11. Other current liabilities

Other current liabilities as of 31 December 2004 and 2003 comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Royalty payables 122,108,581 69,497,923 122,108,581 69,497,923

Accrued expenses 26,934,993 26,613,018 26,934,993 19,379,289

Accrued inventory price adjustment 65,942,840 92,151,954 65,942,840 92,151,954

Other 61,780,010 67,392,425 52,517,091 64,788,707

Total 276,766,424 255,655,320 267,503,505 245,817,873

Accrued inventory price adjustment represents changes in liability for unpriced inventory shipments due to

fluctuations in the quoted market price of the inventory.

12. Payable for concession assets acquired

The Company has entered into an agreement with the previous holders of mining rights under Concession No.

MLA 1/2541 to compensate those previous holders an amount of Baht 60 million for relinquishing their rights under

the concession. Payments under the agreement are being made over a term of 24 equal monthly installments commencing

January 2003 and includes the settlement of certain outstanding obligation between the two parties. At 31 December

2004 and 2003 amounts outstanding comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Due within one year - 19,451,288 - 19,451,288

More than one year - - - -

Total - 19,451,288 - 19,451,288

2004 2003 2004 2003

Baht Baht Baht Baht

Payable for concession assets acquired 19,451,288 45,000,000 19,451,288 45,000,000

Less: Payment during the year (19,451,288) (25,548,712) (19,451,288) (25,548,712)

Total - 19,451,288 - 19,451,288


10. Loans from financial institutions (Cont'd)






13. Payable for land use compensation

The Company is required to compensate the Department of Forestry an amount of Baht 58 million as compensation

for the use of forest areas. An amount of Baht 25 million was paid during the year 2002. The outstanding balance of

Baht 33 million is being repaid annually since January 2003, with the final payment due in January 2005. As at 31

December 2004 and 2003 outstanding amounts due for land use compensation comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Due within one year 11,061,405 11,061,405 11,061,405 11,061,405

More than one year - 11,061,405 - 11,061,405

Total 11,061,405 22,122,810 11,061,405 22,122,810

2004 2003 2004 2003

Baht Baht Baht Baht

Payable for land use compensation 22,122,810 33,184,214 22,122,810 33,184,214

Less: Payment during the year (11,061,405) (11,061,404) (11,061,405) (11,061,404)

Total 11,061,405 22,122,810 11,061,405 22,122,810

14. Long‹‹‹‹‹‹‹‹‹‹‹ -‹‹‹‹‹‹‹‹‹‹ ‹‹‹‹Term Loans

Long‹‹‹‹‹ -‹‹‹‹ term loans as at 31 December 2004 and 2003 comprise:

2004 2003 2004 2003

Baht Baht Baht Baht

Due within one year 102,500,000 - 102,500,000 -

More than one year 547,500,000 450,000,000 547,500,000 450,000,000

Total 650.000,000 450,000,000 650,000,000 450,000,000

The movements in the borrowings can be analyzed as follows:

For the year ended 31 December 2004

Baht Baht

Opening amount 450,000,000 450,000,000

New loan agreements 200,000,000 200,000,000

Closing amount 650,000,000 650,000,000

In August 2003, the Company entered into unsecured 3 year bill of exchange agreements for amount of Baht

200 million through a local bank. In November 2003, the Company entered into 2 unsecured loan agreements for

a total amount of Baht 600 million with two local banks to refinance existing long-term loans. The repayment schedules

are up to 3 years from the drawdown date. These new facilities have been contracted at a market rate of interest

which is in the range of 2.5 % to 3 %.

51Padaeng Industry


Consolidated‹‹‹‹‹‹ Company







14. Long‹‹ -‹‹‹‹‹‹ term loans (Contûd)

i) Financing arrangements available

2004 2003 2004 2003

Baht Baht Baht Baht

Bank overdraft 90,000,000 110,000,000 90,000,000 110,000,000

Trust receipts / promissory notes 2,069,050,000 1,672,115,800 2,069,050,000 1,672,115,800

Bank guarantee 573,810,000 450,640,200 573,810,000 450,640,200

Packing credit 60,000,000 60,000,000 60,000,000 60,000,000

Bank loan 1,089,202,500 800,000,000 1,089,202,500 800,000,000

Total 3,882,062,500 3,092,756,000 3,882,062,500 3,092,756,000

ii) At balance sheet date, the following had been drawn down under the above facilities:

2004 2003 2004 2003

Baht Baht Baht Baht

Promissory notes - 350,000,000 - 350,000,000

Trust receipts 283,819,241 463,105,370 283,819,241 463,105,370

Bank loan 650,000,000 450,000,000 650,000,000 450,000,000

Total 933,819,241 1,263,105,370 933,819,241 1,263,105,370

15. Provisions for restoration expense

2004 2003 2004 2003

Baht Baht Baht Baht

Balance at the beginning of the year 40,148,165 40,923,176 40,148,165 40,923,176

Additional provisions

charged to the statement of income 10,702,136 11,793,292 10,702,136 11,793,292

Amounts utilised (29,306,937) (12,568,303) (29,306,937) (12,568,303)

Balance at the end of the year 21,543,364 40,148,165 21,543,364 40,148,165

The provision for restoration costs represents amounts provided for the estimated costs of restoration

of residual ponds in Tak and the tailing dam and rehabilitation mined area at the Mae Sot mine in accordance

with government regulations.






53Padaeng Industry


6. Share capital and premium on share capital

Number of Ordinary Shares

shares shares premium Total

Baht Baht Baht

As at 31 December 2003 226,000,000 2,260,000,000 602,413,600 2,862,413,600

Movement during the year - - - -

As at 31 December 2004 226,000,000 2,260,000,000 602,413,600 2,862,413,600

As at 31 December 2004, the total authorized number of ordinary shares is 226,000,000 shares‹‹‹ (2003

: 226,000,000 shares) with a par value of Baht 10 per shares (2003 : Baht 10 per share). All issued shares

are fully paid.

17. Legal reserve

2004 2003 2004 2003

Baht Baht Baht Baht

As at 31 December 2003 - - - -

Appropriation during the year 9,791,560 - 9,791,560 -

As at 31 December 2004 9,791,560 - 9,791,560 -

Under the Public Companies Act.,B.E.2535, the company is required to set aside as a legal reserve at

least 5 % of its net profit after accumulated deficit brought forward (if any) until the reserve reaches 10 % of

the registered capital.

18. Selling and administrative expenses

The following expenditures, classified by nature, have been charged against the selling and administrative

expenses:

2004 2003 2004 2003

Baht Baht Baht Baht

Depreciation on property, plant and

equipment (Note 7) 337,724,334 315,255,107 337,453,734 314,263,751

Impairment expenses (reversal)

(Note 7) 21,218,479 (293,597) 21,218,479 (293,597)

Bad debt expense (reversal) - (20,728,771) - (20,728,771)

The reversal of doubtful accounts relates to the collection of previously written off receivables from

a subsidiary.





19. Finance costs - net

Finance costs relate to the following:

For the year ended 31 December 2004 2003 2004 2003

Baht Baht Baht Baht

Interest income 4,088,462 1,659,608 4,078,691 1,904,177

Interest expense (30,613,995) (39,781,208) (31,495,896) (40,807,578)

Total finance costs - net (26,525,533) (38,121,600) (27,417,205) (38,903,401)

20. Basic earning (loss) per share

Basic earnings (loss) per share is calculated by dividing the net profit (loss) attributable to shareholders by

the weighted average number of ordinary shares in issue during the year.

For the year ended 31 December 2004 2003 2004 2003

Baht Baht Baht Baht

Net profit (loss) attributable to

common shareholders (Baht) 217,026,691 2,841 221,629,549 2,797,889

Weighted average number of

ordinary shares on issue (shares) 226,000,000 226,000,000 226,000,000 226,000,000

Basic earnings (loss) per share (Baht) 0.96 0.00 0.98 0.01

There are no potential dilutive ordinary shares in issue for the years presented and no diluted earning

per share is presented.

21. Bank guarantee issued by banks

As at 31 December 2004, the Company and subsidiaries have given letters of guarantee in the ordinary

course of business issued by banks of approximately Baht 231.36 million (2003 : Baht 211.24 million).

22. Capital expenditure and commitments

As at 31 December 2004 and 2003, the Company has the following commitments for the acquisition of

plant and equipment that have been contracted but not recorded as liabilities:

2004 2003 2004 2003

Baht Baht Baht Baht

Not later than 1 year 52,375,405 25,500,901 52,375,405 25,500,901

Later than 1 year - - - -

Total 52,375,405 25,500,901 52,375,405 25,500,901

As at 31 December 2004 and 2003, the Company has the following commitments for the purchase of raw

materials have been contracted but not recorded as liabilities:

2004 2003 2004 2003

Baht Baht Baht Baht

Not later than 1 year 1,578,974,225 1,211,179,414 1,578,974,225 1,211,179,414

Later than 1 year 573,220,954 323,192,852 573,220,954 323,192,852

Total 2,152,195,179 1,534,372,266 2,152,195,179 1,534,372,266








23.

Segm

ent in

form

ation

The C

om

pany

pro

duces

a s

ingle p

roduct pro

duced in T

haila

nd for both

dom

est

ic a

nd e

xport m

ark

ets

, utiliz

ing the s

am

e a

ssets

. The C

om

pany

does

not pre

sent se

gm

ent info

rmation a

s it c

onsiders

its

business

opera

tions

tobe in o

ne s

egm

ent.

24.

Relate

d p

arty tra

nsactions

The C

om

pany

is c

ontrolle

d b

y Um

icore

incorp

ora

ted in B

elgium

which o

wns

significance o

f th

e c

om

pany's

share

s. T

he rem

aining o

f th

e s

hare

s is w

idely

held

.

i)In

vestm

ents

in s

ubsid

iaries

Deta

ils o

f inve

stm

ents

in s

ubsidiaries

are

as

follo

ws:

Subsid

iaries

Padaeng P

roperties

Co.,

Ltd

.80,000,000

100

80,000,000

33,050,737

80,000,000

100

80,000,00

35,565,546

Puth

ep C

o.,

Ltd

.145,584,742

100

145,584,742

161,926,604

145,584,742

100

145,584,742

159,669,021

Padaeng Indust

ry (Laos)

Co.,

Ltd

.5,000,000

100

5,000,000

-

5,000,000

100

5,000,000

-

Padaeng Inte

rnational M

ining C

o.,

Ltd

. 100,000

100

100,000

-

100,000

100

100,000

-

Sila

Ente

rprise

Co.,

Ltd

.9,000,000

55

4,950,000

4,696,684

9,000,000

55

4,950,000

3,494,038

South

East

Asia M

eta

ls C

o.,

Ltd

.200,000,000

100

200,000,000

159,260,339

200,000,000

100

200,000,000

158,365,042

435,634,742

358,934,364

435,634,742

357,093,647

Allsu

bsidiaries

are

incorp

ora

ted

inThaila

nd

exceptPadaeng

Indust

ry(L

aos)

Co.,Ltd

.

Atan

extra

ord

inary s

hare

holdersû m

eetin

g, Sila

Enterp

rise C

o.,L

td. pass

ed a

special re

solutio

nto

‹decre

ase

its registere

d‹‹ share

fro

m B

aht 15 m

illion

toBaht9

million‹‹‹‹‹‹‹‹‹‹‹‹‹

by

reducing

40%

ofparva

lue fro

m B

aht 150,000

each

to B

aht 90,000

each‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹‹ for100

share

s.The

Com

pany

registe

red

the

special re

solution w

ith

the R

egistrar ‹of

Partners

hip

sand

Com

panies

on

10

July

2003.As

are

sult,th

ecarrying v

alue

ofth

eCom

panyûs

inve

stm

ent in S

ila E

nte

rprise

Co.,Ltd

.has

been reduced b

y40 %

.

The im

pactto

minority

share

hold

ers

was

Baht2,700,000.

Com

pany

31‹‹‹ ‹‹‹‹D

ecem

ber‹‹ 2004

Com

pany

31‹ ‹D

ecem

ber‹‹‹ 2003

55Padaeng Industry


Paid

up

capital

Baht

Cost

Baht

%

Owners

hip

investm

ent

Paid

up

capital

Baht

Cost

Baht

%

Owners

hip

investm

ent

Carryin

g

valu

e

Baht

Carryin

g

valu

e

Baht



24. Related party transactions (Contûd)

ii) Sales of goods

2004 2003 2004 2003

Baht Baht Baht Baht

Sales of goods:

Sila Enterprise Co., Ltd. - - 8,536,508 6,799,348

Umicore 402,547,355 348,296,798 402,547,355 348,296,796

Umicore Marketing Services

(Far East) Ltd. 31,876,530 18,155,130 31,876,530 18,155,130


(Thailand) Co.,Ltd. 68,267,322 39,126,956 68,267,322 39,126,956

Umicore Malaysia SDN BHD - 1,608,147 - 1,608,147

Umicore Precious Metal

(Thailand) Co.,Ltd. 1,283 - 1,283 -

Sales to related companies are based on industry market price.

iii) Purchases of goods and services

2004 2003 2004 2003

Baht Baht Baht Baht

Purchases of goods and services:

Padaeng Industry (Laos) Co., Ltd. - - 2,956,839 4,334,691

Padaeng Properties Co., Ltd. - - 1,524,141 1,325,765

Umicore 677,921 114,069,912 677,921 114,069,912


(Far East) Ltd. 1,154,474 2,178,885 1,154,474 2,178,885


(Thailand) Co., Ltd. 22,441,907 15,346,358 22,441,907 15,346,358

Purchases from the subsidiary company are based on industry market price.







iv) Outstanding balances arising from sales/purchases of goods and services


2004 2003 2004 2003

Baht Baht Baht Baht

Receivables from related parties:

Sila Enterprise Co., Ltd. - - 589,394 696,558

Umicore 9,786,330 25,619,450 9,786,330 25,619,450

Umicore Marketing Services (Far East) Ltd. 12,792,474 - 12,792,474 -

Umicore Marketing Services (Thailand) Co.,Ltd. - 1,713,819 - 1,713,819

Total 22,578,804 27,333,269 23,168,198 28,029,827


2004 2003 2004 2003

Baht Baht Baht Baht

Payables to related parties:

South East Asia Metals Co., Ltd. - - - 79,769,552

Padaeng Industry (Laos) Co., Ltd. - - - 4,096,350

Padaeng Properties Co., Ltd. - - 109,710 108,013

Umicore 418,682 7,014,374 418,682 7,014,374

Umicore Marketing Services (Far East) Ltd. - 1,156,517 - 1,156,517

Umicore Marketing Services (Thailand) Co.,Ltd. 395,299 2,692,652 395,299 2,692,652

Total 813,981 10,863,543 923,691 94,837,458

v) Short - term loans and advances to related parties, net


2004 2003 2004 2003

Baht Baht Baht Baht

Padaeng Industry (Laos) Co., Ltd. - - 9,012,962 8,768,297

Puthep Co., Ltd. - - 1,723,505 1,723,505

Padaeng International Mining Co., Ltd. - - 244,800 159,800

- - 10,981,267 10,651,602

Less: Allowance for doubtful accounts - - (46,600) (46,600)

Short - term loans and advances to

related parties, net - - 10,934,667 10,605,002

The outstanding balance from Padaeng Industry (Laos) Co., Ltd. totalling Baht 9 million mainly comprises a Baht

5 million loan which bears an interest rate of MLR plus 5 %. The remaining Baht 4 million comprises advances and

accrued interest.

57Padaeng Industry





vi) Loans from related companies

Consolidated‹ ‹‹‹‹ ‹‹‹‹‹‹‹‹‹‹‹Company

2004 2003 2004 2003

Baht Baht Baht Baht

South East Asia Metals Co., Ltd.

Beginning balance of the year - - 90,000,000 -

Loans increase (decrease) during the year - - - 90,000,000

Ending balance of the year - - 90,000,000 90,000,000

Accrued interest expenses - - 157,808 236,712

As at 31 December 2004, the above mentioned loan from South East Asia Metals Co., Ltd. is an unsecured

3 months term promissory note at an interest rate of 0.25 % over fixed deposit rate per annum.

25. Investment promotion certificates

The Company has been granted certain rights and privileges as a promoted industry under the Investment

Promotion Act of B.E. 2520 (1977). Under these privileges, the Company has received exemption from certain taxes

and duties as detailed in the certificates including exemption from corporate income tax for a period of 8 years from

the commencement of commercial operations or as specified in the certificate.

The following certificates are in force :

Zinc Ingot Investment Promotion certificate No. 1575/2539 (1996)

As a promoted industry, the Company must comply with the terms and conditions as specified in the promotion

certificates. Shareholders of the Company will be exempt from tax on the dividends received during the period in which

the Company is granted exemption from corporate income tax.

26. Revenue reporting of a promoted industry

Based on the Announcement of the Board of the Investment No. PO 14/2541 (1998) dated December 30, 1998

regarding revenue reporting of a promoted industry, the Company is required to report revenue from local sales and

export sales separately and to report separately promoted and non-promoted business. The required information is as

follows:

For the year ended December 31, 2004 Company

Promoted Non-promoted

business business Total

Baht Baht Baht

Income

Income from export sales 125,904,670 631,722,595 757,627,265

Income from local sales 861,008,834 4,045,091,453 4,906,100,287

Total income from sales 986,913,504 4,676,814,048 5,663,727,552

Interest income - 4,078,691 4,078,691

Other income - 17,649,030 17,649,030

Total income 986,913,504 4,698,541,769 5,685,455,273




26. Revenue reporting of a promoted industry (Contûd)

For the year ended December 31, 2003 Company

Promoted Non-promoted

business business Total

Baht Baht Baht

Income

Income from export sales 202,377,277 794,056,246 996,433,523

Income from local sales 778,403,638 3,053,131,618 3,831,535,256

Total income from sales 980,780,915 3,847,187,864 4,827,968,779

Interest income - 1,904,177 1,904,177

Other income - 19,425,555 19,425,555

Total income 980,780,915 3,868,517,596 4,849,298,511

27. Risk management policy for assets and liabilities in foreign currencies

27.1 Significant assets and liabilities in foreign currencies

As at 31 December 2004 :


Term of receipt/ Amount Amount

payment (days) USD Baht USD Baht

Cash at banks - 5,765 224,920 5,765 224,920

Accounts receivable - foreign 15 926,633 36,152,309 926,633 36,152,309

Forward contract receivable 30-180 5,014,455 195,896,842 5,014,455 195,896,842

Forward contract payable 10-180 2,540,812 99,202,872 2,540,812 99,202,872

Trust receipts 30-130 7,239,825 283,819,240 7,239,825 283,819,240

Accounts payable 30-90 8,330,752 326,586,305 8,330,752 326,586,305

For off balance sheet contract

Forward contract receivable

for zinc metal price, Note 27.2 42-378 748,800 29,168,824 748,800 29,168,824

Forward contract payable

for zinc metal price, Note 27.2 42-456 35,363,864 1,378,323,121 35,363,864 1,378,323,121

Amount Amount

Term of receipt EUR Baht EUR Baht

Forward contract receivable 1-30 107,168 5,696,224 107,168 5,696,224

Amount Amount

Payment (days) SEK Baht SEK Baht

Accounts payable 30-90 110,880 652,751 110,880 652,751

Consolidated ‹‹‹‹‹‹ ‹ Company

59Padaeng Industry





27. Risk management policy for assets and liabilities in foreign currencies (Contûd)

27.1Significant assets and liabilities in foreign currencies (Contûd)

As at 31 December 2003:

‹ ‹ ‹‹‹‹‹Consolidated‹‹‹‹‹ ‹ ‹ ‹ ‹‹‹‹‹Company

Term of receipt Amount Amount

/payment (days) USD Baht USD Baht

Cash at banks - 101,531 4,040,916 101,531 4,040,916

Accounts receivable-foreign 15 1,675,838 66,260,101 1,675,838 66,260,101

Forward contract payable 30 3,878,110 154,107,542 3,878,110 154,107,542

Trust receipts 30-60 10,564,964 419,796,798 10,564,964 419,796,798

Accounts payable 30-90 9,614,872 382,073,856 9,614,872 382,073,856

Amount Amount

Payment (days) EUR Baht EUR Baht

Forward contract receivable 30 315,257 15,621,529 315,257 15,621,529

Accounts payable 30-90 357,054 17,888,382 357,054 17,888,382

Foreign currency amounts are translated by using the reference rate quoted by the Bank of Thailand‹‹‹ as at

31 December 2004 and 2003, respectively.

27.2‹‹ Risk management

‹ ‹ ‹ ‹ ‹ The Company has both local and foreign sales in U.S. dollars, which result in revenues and accounts

receivable in U.S. dollars. In addition, the Company has accounts payable and loans from banks in the same currency.

Thus, the Company' s management is able to manage currency exchange risk by matching cash receipt from receivables

with the debts and payment in foreign currencies.

The Companyûs policy on risk management of payables denominated in foreign currencies is to use financial

instruments purchased in the financial markets. For hedging purposes, the Company has entered into forward exchange

contracts to cover commitments denominated in foreign currencies and for the purchase of capital equipment, raw

materials, consumables and spare parts.

In addition, the Company has also entered into forward contracts to sell foreign currencies in order to hedge

revenues and accounts receivable arising from sales of goods in U.S. dollars.

The Company has also entered into forward contracts for the sale of zinc metal and related U.S. dollars

representing approximately 45 % of the totel 2005 exposure to hedge against fluctuations in the price of zinc. Accordingly,

30,000 mt of zinc have been sold forward over 2005 at an average price of Baht 46,955 per ton.

27.3Fair values

The carrying amounts at the balance sheet date of cash and cash equivalents, trade accounts receivable,

short-term loans and advances to related parties, withholding tax, account receivable-revenue department, other

receivables, other current assets, investment and certain other assets, loans from financial institutions, trade‹‹‹‹ accounts

payable, short-term loans from related parties, payable for concession assets acquired, payable for land use compensation,

accrued interest expenses, accrued electricity expenses, other current liabilities, hire qurchase payable‹‹‹ and provision

for restoration expense approximate their fair values.



61Padaeng Industry


27. Risk management policy for assets and liabilities in foreign currencies (Contûd)

27.4 Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in a financial

loss to the Company.

As a general rule, the Company has a credit risk management policy to obtain collateral from the customers

before commencing trade. The collateral may include bank guarantees or cash guarantees.

The Company's credit risk is spread amongst several customers and is not limited to a few customers.

27.5 Interest rate risk

Interest rate risk in the balance sheet arises from the potential for a change in interest rates to have an

adverse effect on the net interest earnings of the Company in the current reporting period and in future years.

Management believes that these risks are acceptable. In 2003, the Company obtained financing facilities

in the amount of Baht 800 million at a fixed rate of interest for a period of 3 years. As of December 31, 2004, the

Company has drawndown Baht 650 million (see note 14).

28. Provident funds

The Company established a registered contributory provident fund in accordance with the Provident Fund Act

B.E. 2530. Under the plan, the Company and employees contribute to the fund at a certain percentage of the employees

basic salary. Contributions to the provident fund are charged to the statement of income in the year to which they related.

29. Reclassification

Certain items in the balance sheet as at 31 December 2003 and statements of income for the year then ended

have been reclassified for comparative purpose to coincide with balance sheet as at 31 December 2004 and statements

of income for the year then ended.


1. Policy on Corporate Governance

The Board of Directors recognizes the importance of Good Corporate Governance and as such established

a policy for achieving it, with emphasis on internal controls and internal auditing. The policy is based on principles

of transparency, disclosure, risk management, adhering to laws and government regulations, minimizing problems

of conflict of interest, taxation issues and ensuring efficient management of operations in the best interest of company

shareholders and other stakeholders for the long run.

2. Rights of Shareholders

In 2004 the company held one annual shareholder's meeting on April 23, 2004 at the Queen Sirikit National

Convention Center. An invitation letter and agenda of the meeting and related documents were sent to shareholders

7 days prior to the meeting. Topics on the agenda included the opinion of the Board of Directors and a complete

report or minutes of the meeting were recorded in order to allow shareholders ample time and opportunity to

review and consider the topics. In addition, the company made every effort to accommodate shareholders by

arranging the meeting in a convenient location with an appropriately sized meeting space and permitted shareholder

proxies in the event some shareholders were unable to attend.

In addition to the annual shareholders' meeting, the company will call additional shareholders' meeting, if

necessary, in the event that specific emergency agenda topics, which are vital to the shareholders' interests or

relate to by-laws or regulations require shareholders' approval.

3. Rights of Stakeholders

The company places much significance upon the rights of every group of stakeholders, particularly the

local community, our customers and our employees. Unwavering commitment is given to environmental protection

and conservation measures, more specifically protecting and treating conditions in water, air and soil to ensure

maximum safety of nature and the local community. Throughout this past year the company also proceeded with

plans for continuous improvement in terms of safety and the environment. Unfortunately, the discovery of the

presence of an abnormal level of cadmium in the soil in areas near the Mae Sot mine has brought the company

an unexpected concern. Immediately the company took action with local and provincial government offices to

address the situation. The company has also commissioned an independent study to determine the cause and

find constructive ways in which to resolve the contamination problem. The company is committed to continue to

help restore the normal conditions of life for the community and will devote the necessary resources to that end.

Furthermore, the company has complied with laws and regulations set by government agencies including

the Department of Industrial Works, Ministry of Industry. In this respect, both the Calcine plant and Tak smelter

was certified with TIS/OHSAS 18001 standard. Moreover the Calcine plant has also received the ISO 14001

certification.

In addition, the company is concerned for and is responsible to our customers. We provide a standardized

and quality product, maintain confidentiality of our customers and have a customer relations division, which provides

technical advice to customers‹ ‹‹‹‹ ‹ ‹ ‹ ‹ ‹ ‹ ‹ ‹ ‹r‹‹‹elations division, which provides technical advice to customers. Furthermore, the

company promotes a good working environment and encourages teamwork and offers training and skills enhancement

for our employees in an effort to best take advantage of human resources.

Compliance to

The Principles of

Good CorporateGovernance

63Padaeng Industry


4. Meeting of Shareholders

In holding the shareholders meeting, the company considers each shareholder as an equal and stipulates

procedures for the meeting according to the law and in compliance with guidelines of the Stock Exchange of

Thailand.

During the 2004 annual shareholders' meeting, a total of 6 directors attended, including the Chairman of

the Audit Committee. The Chairman of the meeting allowed equal opportunity for all shareholders to question,

comment or give suggestions regarding conduct of company operations. Notable inquiries and opinions were

recorded in the minutes of the meeting.

5. Leadership and Vision

The Board of Directors has played a part in establishing the vision, mission, strategy, objectives, business

plans and budget of the company with effectiveness and efficiency. In addition the Board‹ensures that the management

team conducts operations in accordance with the company's business plan, to‹‹‹ add value to our business and

ensure maximum stability for our shareholders.

6. Conflict of Interest

To protect against conflict of interest, the Board of Directors investigates any instance which may lead to

a dispute and has established a policy and guidelines to prevent executives and related persons from using internal

company information for personal gains. Further details are stipulated in Section‹‹‹‹ ‹ Controlling the Use of Internal

Information.

7. Business Ethics

It is the company's philosophy to conduct business with honesty, righteousness, and ethics, with responsibility

towards all stakeholders, namely, our customers, shareholders, employees, society and our country. The company

has issued a Code of Ethics, which are guidelines for work conduct and employee conduct. All related persons are

to use this manual as a reference for carrying out duties according to the mission of the company.

8. Balance of Power for Non-Executive Directors

The company's Board of Directors consists of qualified directors with a broad realm of experience, totaling

11 members as follows:

- Executive Directors 2 members

- Directors representing major shareholders 6 members

(Umicore of Belgium holds 4 seats Ministry of Finance holds 1 seat

Bangkok Bank Public Co., Ltd. holds 1 seat‹)

- Directors on the Audit Committee 3 members

The company's Board of Directors is responsible for acting in compliance with by-laws, objectives and

guidelines of the company and resolutions of the shareholders meeting, with honesty and prudence in the best

interests of the company. Company directors have fixed terms according to company guidelines, which state that

at every annual meeting 1 in 3 director(s) will resign.

Compliance to The Principles of Good Corporate Governance


9. Aggregation or Segregation of Positions

The position of the Chairman of the Board of Directors and the position of the Chief Executive Officer are

kept separate as to ensure a clear distinction between authorities, that of policy making and day to day operations,

respectively. The company has clearly defined the authorities and responsibilities of management on every level.

10. Remunerations for Directors and Management

Remuneration for Directors- Remuneration for company directors has been determined in a clear manner

and is comparable to that of similar companies in the industry. The amount of remuneration has been approved

by shareholders. Directors who have been selected to sit on the Audit Committee and Strategic Committee receive

additional remuneration reflective of the added work responsibility.

Remuneration for Top Executives- Remuneration for top executives has been determined in accordance

with the principles and policy set by the Board of Directors and correspond with overall company performance

and that of each individual executive. The management submits remuneration of executives to the Board of Directors

for consideration and final approval.

Remuneration for Directors in 2004 is detailed in Section Remuneration for Executives.

11. Meetings of the Board of Directors

The Board of Directors has regular meetings held every 3 months and may call additional special meetings

as needed. Clear agenda topics and agenda minutes of the meetings are prepared in advance of each meeting

and the Board Secretary sends out an invitation letter and relevant documents to board members prior to the

meeting, so as to allow sufficient time for review, During 2004, the Board of Directors met 4 times with records

of attendance as follows:

Name Term Appointed ‹‹‹‹‹to Office No.of Meetings Excused Attendance

(times)

1. Mr. Arsa Sarasin 23 Apr.04 - 30 Apr.06 4 - 4

2. Mr. Paron Israsena 22‹ Apr.03 - 30 Apr.06 4 1 3

3. Mr. Kosit Panpiemras 26 Apr.05 - 30 Apr.07 4 2 2

4. Mr. Vinai Vamvanij 23 Apr.04 - 30 Apr.06 4 - 4

5. Mr. Aswin Kongsiri 23 Apr.04 - 30 Apr.06 4 1 3

6. Mrs. Naengnoi Na Ranong 22 Apr.03 - 03 Nov.04 3 2 1

7. Mrs. Sirinuj Bisonyabut 26 Apr.05 - 30 Apr.07 1 - 1

8. Mr. Karel Vinck 26 Apr.05 - 30 Apr.07 4 2 2

9. Mr. Jean-Luc Deleersnyder 22 Apr.03 - 30 Apr.06 4 - 4

10. Mr. Michel Moser 23 Apr.02 - 26 Apr.05 4 3 1

11. Mr. Pinit Vongmasa 23 Apr.04 - 30 Apr.06 4 - 4

12. Mr. Andre R. van der Heyden 22 Apr.03 - 30 Sep.04 3 - 3

13. Mr. Bernard Tonnon 10‹ Nov.04 - 30 Apr.06 1 - 1


65Padaeng Industry


12. Committees

The Board of Directors has established the Audit Committee and the Strategic Committee to help in supervising

company operations. Each committee has its own members, scope of work and responsibilities, which are detailed

in section Management Structure. The establishment of the Nomination & Remuneration committee is in the final

stage and will be submitted to the board for approval in the first quarter of 2005.

13. Internal Controls

The company recognizes the importance of internal control systems on both management and operational

levels and has created an authority manual as the definitive reference. An independent internal audit department,

reporting directly to the Audit Committee, works as an internal checks and balances and conducts audits as needed.

The company also pays a great deal of attention to the risk management of the company. The company has

set up a currency hedging program to minimize risk arising from the fluctuation of foreign exchange. The company

also provides a framework to ensure the compliance with laws & regulations and taxation issue.

14. Report of the Board of Directors

The Board of Directors is responsible for the financial statements of the company and its subsidiaries and

the financial information disclosed in the annual report. These financial statements are prepared in accordance with

generally accepted accounting principles in Thailand. Important information is sufficiently disclosed in the notes to

the financial statements.

The Board of Directors has set up the Audit Committee, made up of independent directors, to supervise

and be responsible for the integrity of the financial statements and internal control system. The opinions of the

Audit Committee are written in the annual report.

The Board of Directors has the opinion that the company maintains adequate internal controls and can

reasonably show credibility towards its financial statements as of December 31, 2004.

15. Investor Relations

The Board of Directors has called for the disclosure of company information in an accurate, complete,

transparent and widespread manner. Financial information as well as general information about the company, which

might impact the value of company stock, is readily available. Shareholders and other interested parties may locate

any such information through the various Stock Exchange of Thailand media outlets or from the company's website.

Although a specific investor relations division has not yet been established, potential investors may obtain information

by contacting the company directly at Tel: 02-661-9900 or at www.padaeng.co.th and www.padaeng.com or e-mail

inquiries to [email protected].


The companyûs shareholders are comprised of 51% Thai nationals and 49% foreign nationals. The company

has Baht 2,260 million registered capital, which is fully paid up. It is divided into 226,000,000 ordinary shares at

Baht 10 per share.

a) List of the top 12 shareholders of Padaeng Industry Public Co., Ltd.

as of 2 April 2004, which is the latest date of the close of the Shareholdersû Register is as follows:

Name No. of Shares % of Total Shares

1. Umicore 106,002,442 46.90

2. Ministry of Finance 31,200,000 13.81

3. Thai NVDR Co., Ltd. 13,774,971 6.10

4. Mr. Anan Utharntharm 7,380,800 3.27

5. Bangkok Bank Public Company Limited 7,301,070 3.23

6. Mr. Cheewin Chaicheewinlikit 2,997,050 1.33

7. HSBC (Singapore) Nominees Pte Ltd. 1,970,213 0.87

8. Thailand Securities Depository Company Limited for Depositors 1,795,135 0.79

9. SCB Securities Company Limited

by Hunters Assets Management Co., Ltd. 1,710,000 0.76

10. Gerlach&Co-Dimensional Emerging Markets Value Fund, Inc. 1,600,800 0.71

11. Mitsiam International Ltd. 1,220,000 0.54

12. Thailand Iron Works Public Company Limited 1,170,000 0.52

b) Major Shareholders

Name No. of Shares % of Total Shares

1. Umicore 106,002,442 46.90

2. Ministry of Finance 31,200,000 13.81

Policy for payment of dividends

Under normal circumstances an amount of at least 5 % of profits after corporate taxes must be put in

reserve, until the total amount in reserve equals at least 10 % of the company's authorized share capital, the

company will then pay dividends in the amount of 50 % of profits after corporate taxes. An exception can be

made if it is necessary for the company to use this amount for investment in future business expansion.

A subsidiary will pay dividends only from profits generated by the subsidiary company. Each time the

subsidiary company pays a dividend; an amount of at least 5 % of profits after corporate taxes must be put in

reserve, until the total amount in reserve equals at least 10 % of the subsidiary company's authorized share capital.

There is no fixed dividend payment policy for the subsidiary.

ShareholdersStructure


Organization Chart of Padaeng Industry Public Company Limited

Mining & Exploration

(Mae Sot)

Procurement

(Bangkok)

Audit Committee Strategic Committee


Managing Director

Internal Audit Advisor

Calcine Plant

(Rayong)

Zinc Plant

(Tak)

Finance &

Accounting

(Bangkok)

Marketing

(Bangkok)

Human Resources

& Corporate Admin.

(Bangkok)

Board Secretary Technical Services

Board of Directors

67Padaeng Industry



Padaeng Industry Public Company Limited is made up of 3 committees.

1) The Board of Directors

The duties and responsibilities of the company's Board of Directors are as follows:

1. Manage company operations according to the law, rules and regulations, mission of the company and resolutions

of the company shareholders

2. Determine the amount of dividend to be paid to shareholders

3. Determine the amount of compensation or bonus to be awarded to officers or employees or other staff working

for the company (permanent or temporary employees), not including pension benefits or other remuneration

paid to directors

4. Review the company's strategic work plan and assessment of operations as submitted by the Strategic

Committee

In carrying out its duties and responsibilities, the Board of Directors may authorize Chief Executive Officer, Managing

Director, any director or any other individual to take action on its behalf.

The company's Board of Directors consists of 11 members as follows:

No. Name Title

1. Mr. Arsa Sarasin Chairman

2 Mr. Paron Israsena Independent Director*

3. Mr. Kosit Panpiemras Director

4. Mr. Vinai Vamvanij Indendent Director

5. Mr. Aswin Kongsiri Independent Director

6. Mrs. Sirinuj Bisonyabut Director

7. Mr. Karel Vinck Director

8. Dr. Jean-Luc Deleersnyder Director

9. Mr. Michel Moser Director

10. Mr. Pinit Vongmasa Director and Chief Executive Officer

11. Mr. Bernard Tonnon Director and Managing Director

and Dr. Surin Tanticharoenkiat Secretary to the Board of Directors

Remark : During the year 2004, Mrs. Naengnoi Na Ranong and Mr. Andre van der Heyden have resigned from

PDI's directors and the Board have appointed Mrs. Sirinuj Bisonyabut and Mr. Bernard Tonnon to replace their term

respectively.

* The Definition of Independent Director

1. Holding shares not more than 5 percent of paid-up capital of the company, affiliated company, associated

company or related company, which shall be inclusive of the shares held by related persons.

2. Being a director who does not take part in the management of the company, affiliated company, associated

company, related company or majority shareholder of the company.

Not being a employee, staff member or advisor who receives a regular salary from the company, affiliated

company, associated company, related company or majority shareholder of the company; for example, the

chief Executive Officer of the company may not be a member of the Audit Committee because he is directly

responsible for the management etc.

Management

69Padaeng Industry


3. Being a director who has no direct of indirect benefit or interest in finance and management of the company,

affiliated company, associated company or majority shareholder of the company.

‹Being a director who has no benefit or interest of the said nature during the period of 1 year before his appointment

as a director except where the Board of Directors has carefully considered tha‹t such previous benefit or interest

does not affect the performance of duties and the giving of‹independent opinions.

4. Being a director who is not a related person or close relative of any management member or majority

shareholder of the company.

5. Being a director whom is not appointed as a representative to safeguard interests of the company's directors,

majority shareholders of shareholders who are related to the company's majority shareholders.

6. Being capable of performing duties, giving opinions or reporting the results of performance of work according

to the duties delegated by the Board of Directors free and clear of the management or ‹the majority shareholders

of the company including related persons or close relatives of the said persons.

The authorized directors consist of Mr. Arsa Sarasin and Mr. Pinit Vongmasa and Mr. Bernard Tonnon who shall

be two directors jointly sign with the company seal's affixed.

2) Audit Committee

The Audit Committee has been established on 22 December 1998 and at present consists of 3 directors as follows:

No. Name Title

1. Mr. Vinai Vamvanij Chairman of the Audit Committee

2. Mr. Paron Israsena Audit Committee Member

3. Mr. Aswin Kongsiri Audit Committee Member

and Dr. Surin Tanticharoenkiat Secretary to the Audit Committee

In 2004 the committee met 5 times and reported to the Board of Directors.

The Audit Committee's scope of authority is as follows:

1. The Audit Committee shall have the authority to request any information it sees relevant to its activities

from the director or any managers of the company.

2. The Audit Committee may seek independent professional advice as it considers necessary.

3. The Audit Committee will have no executive powers with regard to its findings and recommendations.

3) Strategic Committee

The Strategic Committee has been established on 13 July 2000 and at present consists of 4 members as follows:

No. Name Title

1. Mr. Vinai Vamvanij Member

2 Mr. Pinit Vongmasa Member

3. Dr. Jean-Luc Deleersnyder Member

4. Mr. Bernard Tonnon Member

and Dr. Surin Tanticharoenkiat Secretary to the Strategic Committee

In 2004 the committee held 4 meetings and reported to the Board of Directors.

Management (Continue)


The Strategic Committee is responsible for preparing and providing the company's strategic work plan

and assessment for consideration by the Board of Directors, as well as giving recommendations to the Board of

Directors. All matters regarding strategy and planning should be channeled through the Strategic Committee for

presentation and/or recommendation to the Board of Directors for consideration. Moreover, the Strategic Committee

acts as an advisor to the Board of Directors, but does not have decision-making authority.

The Executives

No. Name Title

1. Mr. Arsa Sarasin Chairman

2. Mr. Pinit Vongmasa Chief Executive Officer

3. Mr. Bernard Tonnon Managing Director

4. Mr. Chaiyan Roojnawate Senior Vice President - Zinc Plant Operations

5. Dr. Kitisil Kalayanakoul Senior Vice President - Calcine Plant

6. Mr. Somluck Toonkumtornchai Senior Vice President - Marketing

7. Mr. Philippe Salmon Senior Vice President - Finance & Accounting

The Selection of Company Directors and Executives

The company is in the final stage of setting up the Nomination & Remuneration committee which will be

submitted to the board for approval in the first quarter of 2005. Of all the company's directors, six are representatives

from the top shareholders. Umicore of Belgium holds a total of 4 seats, the Ministry of Finance holds 1 seat and

the Bangkok Bank Public Co., Ltd. holds 1‹‹‹ seat on the Board of Directors.

The appointment of a director requires a majority vote from the eligible voting shareholders present at

the shareholder's meeting. Voting shall be according to the following guidelines:

1. Each shareholder shall have one vote for each share.

2. Each shareholder must exercise all the votes he has under item (1) to elect one or several persons to

be directors but cannot divide his votes to any person particularly.

3. The candidates shall be ranked in order descending from the highest number of votes received to the

lowest, and shall be elected as directors equivalent to the number of directors who are to be elected.

4. If there is a tie in the last to be elected and this exceeds the said number of directors, the presiding‹

Chairman shall have an additional casting vote.

Presently, the Board of Directors as a whole submits to the shareholder's meeting the candidates to

replace any director whom has completed a term on the Board.

Remuneration for Executives consists of:

1. In the form of cash

a) In the year 2004 the company paid a total of ‹Baht‹‹‹‹ 4,517,090.50 to 13 Directors (2 Directors have

resigned during the year 2004), 4 Strategic Committee Members and 3 Audit Committee Members‹

‹ as directors' fees and directors' remunerations, detail as follows:


71Padaeng Industry


Directors Position Remuneration ‹‹ ‹Director‹‹ ‹Bonus *

(Bath) For 2004 (Bath)

1. Mr. Mr. Arsa Sarasin Chairman 280,000.00 150,000.00

2. Mr. Paron Israsena Independent Director 245,000.00 100,000.00

Member of Audit Committee 200,000.00

3. Mr. Kosit Panpiemraj Director 230,000.00 100,000.00

4. Mr. Vinai Vamvanij Independent Director 260,000.00 100,000.00

Audit Committee Chairman 200,000.00

Strategic Committee Member 80,000.00

5. Mr. Aswin Kongsiri Independent Director 245,000.00 100,000.00

Member of Audit Committee 200,000.00

6. Mrs. Naengnoi Na Ranong Director 215,000.00 -

(Until 3 November 2004)

7 Mrs. Sirinuj Bisonyabut Director 42,717.39 13,888.73

(Since 10 November 2004)

8. Mr. Karel Vinck Director 230,000.00 100,000.00

9. Dr. Jean-Luc Deleersnyder Director 260,000.00 100,000.00


10. Mr.Michel‹Moser Director 200,000.00 100,000.00

11. Mr. Pinit Vongmasa Director and

Chief Executive Officer 260,000.00 100,000.00


12. Mr. Andre van der Heyden Director and Managing Director 195,000.00 75,000.00

(Until 31 September 2004) Strategic Committee Member 60,000.0

13. Mr. Bernard Tonnon Director and Managing Director 42,717.39 13,888,73

(Since 10 November 2004) Strategic Committee Member 20,000.00

3,593,313.04 977,777.46

Remark: Director Bonus will be proposed to the 2005 Shareholders' Meeting for approval.

b) The company paid a total of Baht 29,877,730 to the 7 executives in the year 2004, as salaries‹‹ and

bonuses.

2 In other forms:

The company contributed to employees' provident fund savings, as a percentage of salary and period of

time enrolled in the fund, ranging from 5 to 10%.

Corporate Governance

The company conducts business in conformity with guidelines of the Code of Best Practices for Directors of

Listed Companies, as set out by the Stock Exchange of Thailand. By doing so, the company demonstrates our

commitment to standards and conduct in building confidence of our shareholders, investors and other related entities

or persons. Moreover, the Audit Committee, through the internal audit department, supervises financial statements,

internal control, and practices of good corporate governance to ensure compliance to policies. The company has also

announced the enactment of the company's Code of Ethics‹‹ ‹‹by‹‹‹‹ ‹which‹‹‹‹‹ all‹‹ executives‹‹‹‹ and employees are expected to

ad‹‹‹here to in conducting bussiness. in addition to ensure efficient and productive business operations as planned, a ‹‹



Strategic Committee has been established with the responsibility of forming the company's strategic plan for

proposal to the Board of Directors.

Along with the mechanisms described above, the company has taken steps in other areas as well, in an

effort to be accepted by our stakeholders and other related entities, as having good corporate governance as called

for by the Stock Exchange of Thailand.

Controlling the Use of Internal Information

During each Board of Director's meeting, a summary of company holdings by executives is submitted for

review, as a mean of monitoring any use of inside information for gains by executives.

Personnel

At year end, the total number of company employees stood at 746, consisting of 89 employees at the

Bangkok office, 423 employees at the Smelter plant in Tak province, 144 employees at the Mae Sot mine and 90

employees at the Calcine plant in Rayong province. In year 2004, compensation paid to employees as salaries

and bonuses totaled Baht‹‹‹ 228,132,137. In addition, the company contributed funds to employees' provident fund

savings, determined as a percentage of salary and period of time enrolled in the fund, ranging from 5-10 %.

The company's total workforce consists of 746 employees. Approximately 22 % of employees have earned

at least a bachelor's level degree, while 40 % have earned an Associate's or Vocational level degree. The remaining

employees have studied at less than vocational level. The majority of company employees reside in Tak province

and the northern region of the country, where the smelter plant and mine is located. The average age of employees

is 39 years, while average tenure of service with the‹company is 13 years. For the year, employee turnover rate

equaled 3.08 %.

Internal Control

During the Board of Director's meeting, No. 01-2005, held on Friday 25 February, 2005, the Board assessed

the system of internal control, the organization and external conditions, risk management, method of disseminating,

communicating and monitoring information, it was determined that the company employs an adequate system of

internal control regarding transactions with major shareholders, directors, management and related persons, as

well as internal control in other areas.

Following is an opinion of the auditor, Suchart Luengsuraswat, Certified Public Accountant, Registration

No. 2807, PricewaterhouseCoopers ABAS Ltd.:

In planning and performing our audit of the financial statements of Padaeng Industry Public Company

Limited for the year-ended 31 December 2004, we obtained an understanding of the internal control system in

order to determine the nature, timing and extent or our audit procedures, for the purpose of expressing our opinion

on the financial statements and not to provide an opinion on the internal control system.

The management of Padaeng Industry Public Company Limited are responsible for establishing and maintaining

an internal control system to assist in achieving management's objective of ensuring, as far as practicable, the

orderly and efficient conduct of its business, including adherence to management policies, the safeguarding of

assets, the prevention and detection of fraud and error, the accuracy and completeness of the accounting records,

and the timely preparation of reliable financial information.

Because of inherent limitations in any internal control system, errors or irregularities may nevertheless occur

and not be detected. Also, projection of any evaluation of the internal control system to future periods is subject

to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness

of the design and operation of policies and procedures may deteriorate. are the weaknesses in internal control

that could have a material effect on the financial statements.


73Padaeng Industry


However, after consideration of the internal control system, we noted no matters involving the

internal control system and its operation that we consider to be material weaknesses under Thai Auditing

Standard 400 "Risk assessments and internal control". Material weaknesses as defined in the Auditing

Standard are the weaknesses in internal control that could have a material effect on the financial statements.

Related Transactions

Look for details of related transactions in Notes to Financial Statement on pages 40 - 61

The company's policy on related transactions is based on the principles of free trade, using the world

price as a reference, and is conducted in the best interest of the company. In this respect, the internal audit

department has also carried out an audit on the related parties transaction in year 2004.

Audit Fee

1. Audit Fee

The company and its subsidiaries has paid audit fees to audit companies, individual auditors or other

businesses relating to the auditors and auditing companies during the previous fiscal year totaling Baht

3,500,000.

2. Non-audit Fee

The company and its subsidiaries has paid non-audit fees, which include services such as auditing

of financial statements prepared under guidelines other than generally accepted accounting principles and

other legal and tax related services, to audit companies, individual auditors or other businesses relating to

the auditors and auditing companies during the previous fiscal year totaling Baht‹‹‹‹ ‹219,905. An additional non-

audit fee will be paid in the future for services previously agreed upon but not yet provided totaling Baht

450,000.



Structure of Corporate Shareholding

(A) Padaeng Industry 191/18-25 CTI Tower, 26th-27th Floor, Mining and smelting of zinc ore and 226,000,000 10 - -

Public Company Ratchadaphisek Road, concentrate as well as marketing of

Limited Khlong Toei district, Bangkok 10110 zinc metal and other by-products

Tel. 0-2661-9900 Fax : 0-2261-1108-10

(B) Affiliated Companies

1. Padaeng Properties 191/18-25 CTI Tower, 26th-27th Floor, Land development and real estate 3,200,000 25 3,200,000 100

Company Limited Ratchadaphisek Road,

Khlong Toei district, Bangkok 10110

Tel. 0-2661-9900 Fax : 0-2261-1108-10

2. Puthep Company 191/18-25 CTI Tower, 26th-27th Floor, Prospecting and mining for 2,348,141 62 2,348,141 100

Limited Ratchadaphisek Road, copper and other base metals Preference

Khlong Toei district, Bangkok 10110 Share 1

Tel. 0-2661-9900 Fax : 0-2261-1108-10

3. Padaeng Poongsan 191/18-25 CTI Tower, 26th-27th Floor, Manufacturing of copper and 10,000,000 25 6,197,746 61.98

Metals Company Ratchadaphisek Road, brass sheet/strip coin blank and

Limitedÿ Khlong Toei district, Bangkok 10110 case cup

N.B. Ceased Tel. 0-2661-9900 Fax : 0-2261-1108-10

operation since‹

February 1999.

4. Padaeng Industry ‹ 49 Ban Dongmieng, Khum 1, Prospecting and mining USD. - - 100

(Laos) Company Unit 6, Chanthabuli, for base metals in Laos 200,000

Limited Vientiane, Laos

5. Padaeng International‹ 191/18-25 CTI Tower, 26th-27th Floor, Investing in exploration and mine‹ 1,000 100 1,000 100

Mining Company Ratchadaphisek Road, development project in Vietnam

Limited Khlong Toei district, Bangkok 10110‹

Tel. 0-2661-9900 Fax : 0-2261-1108-10

6. Sila Enterprise 68/5-68/6 Asia Highway, Marketing of aggregate limestone‹ 100 90,000 55 55

Company Limited Mae Sot district, Tak

Tel. 0-5553-3777 Fax 0-5554-7285

(C) Other Companies

1. ASEAN Potash 16th Floor, SG Tower, Potash mining operation 12,870,000 100 100,100 0.78

Mining Punblc 161/1 Soi Mahadlekluang 3,

CompanyLimited Rajdamri Rd., Lumpini,

Pathumwan, Bangkok 10330

Tel. 0-2650-2711 Fax 0-2650-2715

Number

and types

of all

the share

issued and

paid up

Number

and types

of all

the share

held by

the company

Name Address Nature of Business

No. of

Ordinary

Shares

%

of Total

Shares

Par Value

Each

(Baht)

No. of

Ordinary

Shares

75Padaeng Industry


Registrar Thailand Securities Depository Company Limited

The Stock Exchange of Thailand Building,

4, 6-7 Floor, 62 Ratchadaphisek Road,

Khlong Toei, Bangkok 10110, Thailand

Tel. 0-2229-2800, 0-2654-5599 Fax. 0-2359-1259

Auditor Mr.Suchart Luengsurasaswat or Ms.Somsri Dhanyacheevee,

Ms.Wimon Chiamchittrong or Mrs.Anothai Leekitwattana

Certified Public Accountant Registration Nos.2807, 1905, 3365 and

3442 respectively

PricewaterhouseCoopers ABAS Ltd.

15 th floor Bangkok City Tower

179/74-80 South Sathorn Road, Bangkok 10120

Tel. 0-2286-9999 , 0-2344-1000 Fax. 0-2286-5050

P.O.Box 800 Bangkok 10500

Legal Adviser Dr. Prajit & Suchinda International Law Office

1793/16 Sirinthon Road, Bangplad, Bangkok 10700, Thailand

Tel. 0-2424-5693 Fax. 0-2435-8644

Adviser or contractor under management agreement - None -

Other References


1. General information

1.1 The company 1-7

1.2 Juristic persons in which the company holds more then 10% of shares 74

1.3 References 75

2. Statement by the Chairman of the Board or Board of Directors 8-9

3 Statement by the Audit Committee 29

4 Summary of the company's financial data

4.1 Data from financial statements 11

4.2 Financial ratios 11

5. Nature of business

5.1 Business in brief 7

5.2 Structure of revenues 6

5.3 Changes during the past year 12-23

6. Factors of risk 25

7. Shareholders and management

7.1 Shareholders 66

7.2 Management structure 67-69

7.3 Selection of directors and executives 70

7.4 Remuneration for executives 71

7.5 Other terms of remuneration 71

7.6 Corporate governance 62-65

7.7 Controlling the use of internal information 72

7.8 Internal control 72

8. Connected persons and connected transactions 73

9. Management discussion and analysis 24

10. Financial statements 30-61

SEC contents in accordance with form 56-2

77Padaeng Industry


BANGKOK OFFICE

CTI Tower, 26th-27th Floor, 91/18-25 Ratchadaphisek Road,

Khlong Toei district, Bangkok 10110, Thailand

Telephone : +66 (0) 2661-9900

Fax : +66 (0) 2261-1108-10, +66 (0) 2661-9490

E-mail : [email protected]

Website : www.padaeng.com, www.padaeng.co.th

TAK OFFICE

94 Moo 1, Ban Klonghuaysai Asian Highway 409-410, Nongbuatai subdistrict,

Muang district, Tak 63000, Thailand

Telephone : +66 (0) 5551-7444, +66 (0) 5555-8500

Fax : +66 (0) 5551-7440, +66 (0) 5555-8511

MAE SOT OFFICE

13 Moo 4 Phratad Padaeng subdistrict, Mae Sot district, Tak 63110, Thailand

(P.O.Box 29 Amphoe Mae Sot Tak 63110)

Telephone : +66 (0) 5553-3016-7, +66 (0) 5553-3019

Fax : +66 (0) 5553-3018

RAYONG OFFICE

Padaeng Industrial Estate 15 Padaeng Road, Maptaphut subdistrict,

Muang district, Rayong 21150, Thailand

Telephone : +66 (0) 3868-3318-20

Fax : +66 (0) 3868-3321, (0) 3868-3361

Padaeng Industry Public Company Limited

E-mail : [email protected], Website : www.padaeng.com, www.padaeng.co.th

Documents

ANNUAL REPORT 2004 PADAENG · PDF fileis call ''cathodic protection''. This phenomenon thereby offers a better protection than painting which bring only ''barrier protection